Stock Trading

S&P 500 Chart, June 28, 2010 End of Day

S&P 500 is testing the May 6, 2010 Flash Crash low of 1065.79. Friday’s low was 1069.89.

If get a rally from here that takes up past 1131.23, the highs from the previous rally, we would have an uptrend.

Let us see if we get there.

Futures are negative across the board as fears continue about the economic recovery. We could see Fridays lows challenged today.

Continuing to watch PL, GDI, SLH, and TCB. PL and SLH were up nicely yesterday on above average volume. GDI and TCB were down but on lower volume.

View the full GDI chart at Wikinvest

The market I believe has held up quite well so far for all the negative news and sentiment out there. Most of the headlines are really negative, but the market is not reacting as negatively.

One would have to conclude that there is some accumulation going on in the market. Big boys are buying stock that you and I are selling.

Money managers have to use weakness in the market to accumulate their positions. They have to do this so that they do not put up the prices by their own buying. So, they become buyers when everyone else is selling.

As an example of overly negative tone of the headlines see the story below from CNBC:

For American taxpayers, now on the hook for some $145 billion in housing losses connected to Fannie Mae and Freddie Mac loans, that amount could be just the tip of the iceberg.

According to the Congressional Budget Office, the losses could balloon to $400 billion. And if housing prices fall further, the cost to the taxpayer could hit as much as $1 trillion. Go to the story on CNBC.

As an iPhone owner for over three years, I can attest to the fact that it is not the best phone there is. Apple has done many things right with the iPhone, but the main application is the phone as the name suggests. And it sucks as a phone.

Looks like they have not done much to improve the quality of the phone even in iPhone 4. What a shame!

Apple’s [AAPL 266.70 --- UNCH (0) ] touch-screen smartphone has been a sensation since Day 1 three years ago, and many who own the device believe it to be almost perfect — if only it worked better as a phone.

So it is not surprising that as the first boxes of the new iPhone 4 landed in the hands of the earliest adopters late Wednesday, the antenna’s reception quickly became an Internet obsession. What surprised many of them: the precious little bars that signal network connections inexplicably disappeared when they cradled the phone in their hands a particular way. Sometimes, but not always, the cradling resulted in dropped calls.

via On New iPhone, a Mystery of Dropped Calls – CNBC.

Revised GDP growth for Quarter 1 is 2.7 percent. While not as hot as what was expected, it is still a healthy growth by historical standards. The one naggingly stubborn statistic that is worrying the market is unemployment level — over 9.7 for the entire 2010.

Read the full news item at CNBC.

U.S. economic growth was slower than previously estimated in the first quarter as estimates of business and consumer spending were cut, according to government data on Friday.

In its final estimate, the Commerce Department said gross domestic product expanded at a 2.7 percent annual rate instead of the 3 percent pace it reported last month.

Although the growth pace was below market expectations for a 3 percent rate, it still marked three straight quarters of expansion as the economy digs out of its most brutal downturn since the 1930s.

However, recent data have suggested the recovery lost some momentum in the second quarter, with persistently high unemployment restraining consumer spending, and home building and purchases faltering.

The Federal Reserve this week struck a cautious note on the economy and said the recovery was “proceeding.” The economy is, however, not expected to fall back into recession.

via Economy: US First Quarter Growth Revised Down to 2.7% – CNBC.

Below link points to a aechnical analysis of the current market an CNBC Analyst. As we mentioned before, support in the 1040 area is strong, but if it is broken we could go a lot lower. This article and video highlight this as well.

Check out the video to learn what professional are looking at.

The S&P [.SPX 1073.69 ] closed 1.7 percent lower Thursday at 1,073.69 points after a late-session selloff dented the index. It has now seen four straight days of declines. “The manner in which we got down has me really cautious. We had a large gap down, followed by follow-through, thats not a very pretty picture,” McLaren said.”Id like to see the market hold in here today and then rally into September,” he added.

via CNBC Stock Blog – Watch S&P for Crash Warning Pattern: Charts – CNBC.

Warren Buffett is well known for his investing prowess, and more importantly, his investment discipline and returns. He has been the target of some criticism lately.

His investments in Goldman Sachs and Moodys have come under scrutiny, and he was summoned to testify before Congress. He has publicly defended both Goldman and Moodys for the roles they played in the Financial meltdown of 2008.

The article below takes a look at how Warren Buffett could have used his own rules to avoid being tangled up in this mess. The rules are summarized below. The full article from MSN Investing is a must read.

Lesson No. 1: Invest in what you know
Lesson No. 2: Be frugal, and buy frugal companies
Lesson No. 3: Be a contrarian
Lesson No. 4: Act like an owner when investing in stocks
Lesson No. 5: Playing with borrowed money is playing with fire

Now, I’m not so presumptuous as to try to instruct Buffett. He’s the sort of maestro one learns from. (In fact, one of my best-read columns ever for this website is “10 investing basics from Buffett.”)

Rating Buffett’s performance

But we mortals in the investing world too often make the mistake of learning the rules, then breaking them in the heat of battle. So it’s instructive to learn that Buffett sometimes does the same thing. It reminds us just how valuable Buffett’s basic rules for investing — and life — truly are.

With that in mind, here are a few investing lessons for Buffett — from his very own rule book, which he may have misplaced of late.

via Giving some investing advice to Warren Buffett – MSN Money.

The news agencies have to find a reason for the late selloff, and usually blame it on the wrong issue. The only thing that matters is what the big players are doing. We should watch the market action closely for clues about the direction of the market.

We are going into the earnings with expectations that companies will be reporting less than stellar results, and potentially, revising guidance for futures quarters.

Should we get positive surprises from key companies, we will go higher.

To go down and break the 1050-1040 level on S&P 500, we would need to see a consistent theme of negative surprises from companies.

Investors took a one-two punch of bad news this morning: Existing-home sales fell 2.2 percent in May from April, and Fitch Ratings slashed its rating on BNP Paribas, the largest bank in the euro zone by deposits.

But while some experts say the grim economic data is pushing the markets toward a double dip, Matt McCormick, portfolio manager at Bahl & Gaynor Investment Counsel said investors should not be worried.

“You’re not going to see a double-dip—but it’s going to feel like it as the market becomes more volatile,” he told CNBC.

via US Stocks: Dow Loses 1.4% After Late Selloff – CNBC.

S&P 500 successfully tested the neck-line of the double bottom. Million dollar question is, will it hold today?

Support and resistance levels are important because once they are breached, they change polarity. What was support becomes resistance, and vice-versa. Having broken through the 1105 resistance level on S&P 500, the 1105 level became support.

Yesterday, and today, we have been trading down to 1105-1110 region. We managed to close above that lower end of that level yesterday. Will that hold today?

If we don’t then, we could retest the 1050-1040 level.

Read the article below to see how Russell 2000 is acting relative to S&P 500 Index.

Equities gave back a decent gap to the upside today, but the level I am watching this week is 1105. 

As you can see, today was a perfect retest of the double bottom in the S&P. If that neckline gives way, further downside is on the way. 

via Blog – Jeff Kohler the Option Addict | Stock and Options Trading. 

 Another good article that makes the case for short-term bullish. As regular readers might have noted, our current view is short-term bullish. Near term resistance on S&P 500 is in the 1165-1175 area.

“The force of the last week’s bullish swing was enough to reverse bearish momentum trends on the S&P 500 and the Dow Jones Industrial Average. Weekly MACDH momentum ticked higher on both of these indices, after six straight weeks of declines. Although the MACDH sits below the zero signal line, we can now say that bearish momentum is declining; the bears are losing control of the underlying market trend.”

RSI has moved above 50 as well across the board, so the bulls have made substantial progress over the last two weeks. We remain cautious, as volume was a bit anemic last week, so we may see some consolidation during the upcoming week as prices fight to break through the highlighted resistance area, however the intermediate-term trend is to the upside.

via Slope Of Hope with Tim Knight.

While this not the best of news, it was expected. Till April 30, 2010 the first time home buyer tax incentives kept the home buying interest alive. The expectations were too high for the May 2010 numbers.

A drop of 2.2 percent month over month after an upward revision of April numbers is not bad at all. This shows that there is considerable latent demand in the housing market.

The National Association of Realtors said sales fell 2.2 percent month over month to an annual rate of 5.66 million units from an upwardly revised 5.79 million-unit pace in April. Analysts polled by Reuters expected May sales to rise 5.5 percent to a 6.12 million-unit pace from the previously reported 5.77 million units in April.

via Existing Home Sales Fall Unexpectedly in May – CNBC.