AMZN - ringing the register

Two posts ago we highlighted the probable scenario of AMZN breaking out over the $78.50 level and heading $3 higher. Well if you followed along and were lucky enough to be long then its time to ring the register to realize that $3 gain.

Yes the market is very strong and AMZN may indeed run higher. But taking a partial off the table (or the whole thing depending on your risk tolerance) is wise given how whippy this market can be.

HAPPY TRADING!

The SPX on the slippery slope...

Down 4 weeks in a row isnt bad...yet. Actually we have been down eight separate times for 3 or more consecutive weeks since the beginning of 2007 to varying degrees of pain. But it is usually when people least expect it that the market takes a tumble. Take this piece of information from elliottwave.com...


Is the most powerful of all waves right around the corner?

The short answer is "YES."


Let's us just say, if wave 3 was a superhero, he'd probably be The Flash (though he could be The Hulk).

Like The Flash, there's no mistaking wave 3's characteristics:

* It gets to where it's going in a hurry.
* It usually catches everyone by surprise, and
* You'll know it when you see it.

Well, there you have it. A mutant superhero named Flash/Hulk is going to put the kabash on the market very soon.

Personally we think they are right...we just wish they would have left out the superhero analogy.

HAPPY TRADING!

AMZN - One to watch

One to watch as the S&P attempts to stabalize off its double bottom yesterday is AMZN. The stock is approaching a breakdown level from a few days ago at $78.50. If it manages to get through on good volume it has a very good chance of running up to $81 - $81.50.

The price target nearly $3 higher comes from taking the difference from the recent low near $75.50 and the possible breakout level of $78.50 and rolling it up...hence $81.50 (or slightly lower for the risk averse).

Morgan Stanley did WHAT?

Heres a story for you that may have you thinking Deja Vu all over again...

Morgan Stanley plans to repackage a downgraded collateralized debt obligation backed by leveraged loans into new securities with AAA ratings in the first transaction of its kind, said two people familiar with the sale...(read full story here).

Isnt this pretty much the same crap that got us in trouble in the first place? How is this stuff legal anyway - repackaging downgraded CDO's into AAA rated instruments???

This may be the start of something bigger that will eventually bite us all in the ass or it may just be something that turns out to be innocuous. Either way it sounds fishy.

HAPPY TRADING!

880 SPX remains the key

The 880 level in the SPX is on everyones radar...hey even the fundamental guys are looking at it out of the corner of their eyes (so no one thinks they care). And it should be on everyones radar because it is that technically important.

If you have been a regular reader of this Technical Insights Blog then you know how often we have mentioned SPX 880, and how technicals are all the rage these days from mindless TV reporters and their ilk. We have been wrong before (lets just say our latest mishap was with Doug Kass and a 50 point drop in the S&P) but this level is so significant that we are prepared for a meaningful sell off once 880 is broken. Not just broken any old way...but broken on higher than average volume. Or a few consecutive days of closes below even if it were to occur on below average volume.

Todays volume was lackluster which means there wasnt any conviction in the selling. Almost seems like there was more disinterest in buying than there was a propensity to sell. But things change quickly, regardless of how much cash any mutual funds may be sitting on.

Besides the SPX, individual stock charts are breaking down also. GE was a smart short once it broke its 100 day moving average 2 days ago at $11.50...V looks like a good short now that it has broken strong support at $60...JCP looks like the weakest retailer as it is breaking below its recent triangle...and the list goes on.

There are a few stocks that look to be coming into support areas and will probably get nice bounces soon (of the many AMZN and NBL come to mind first) but the market needs to stabilize before safely playing bounces can take place.

Bottom line: this is a time for caution. For the past 4 trading sessions selling early strength and covering late day weakness has been a rewarding strategy. So for those of you who like to play from the short side this is your chance. Otherwise cash is a wise place to be as the clarity around the next leg takes shape.

HAPPY TRADING!

The brutality of trading in a shortened holiday week

As we all know by now (YAWNNNN) this week is a sleeper when it comes to trading. There is some news out here and there, along with a few significant moves (FSLR is taking it on the chin and SKS is breaking out like a teenager) but overall the action is as thin as a wrist on Gay Parade day. And if there is one thing you learn as a seasoned trader is that trying to trade the utter crap that goes on in a week like this just gets you in trouble. Basically its like shitting in bed and trying to kick it out...it just doesnt work. So our advice is dont do it.

Instead head to the local coffee shop, turn on your laptop and start perusing your favorite blogs (like adams options, trader feed, zero hedge, and hopefully this one) and catch up on what is really going on around the street. Whatever you do, dont watch the nonsense on CNBC...we repeat DO NOT watch. This will only clutter your mind and fill it with jibberish which will only get in the way of you making your own, well thought out decisions about where to invest (think cash!).

Have a great holiday weekend.

HAPPY TRADING!

SBUX anyone?

Today is one of those sleepy-lazy days for the stock market...its a Friday during the summer, Russell Rebalancing day, and one week before the long 4th of July weekend. So whats a trader to do? Nothing because trading on these directionless days usually get you in trouble.

The best thing any trader can do today is turn off your monitor and take a short walk to the nearest Starbux for a Grande Lazy Slothaccino. Then sit back and take a nice long nap.

And if youre looking for more ingenious uses for Starbux coffee visit our friends over at the dopey cowboy...helps pass the day.

HAPPY TRADING!

Dick Bove never ceases to amaze...

Dick Bove never ceases to amaze us. Barron's Online did an interview with him and here is an excerpt: "Barrons.com: If you buy Citigroup (C) stock now, is it like buying Citi in the early '90s, when the business seemed doomed and the stock price was down around $2 a share? Bove: I think so -- as long as Citigroup is going to do well in the next few quarters.

Excuse us for being obvious here but isnt this just common sense? Dont you want to buy a stock if you think its future prospects look good??? Remember folks, this is a seasoned and very senior analyst saying these words. If someone junior who wasnt so well known made these comments they would be laughted at.

What are we talking about? We are laughing!

Thanks for your insight Dick.

HAPPY TRADING!

Light volume expiry...so whats next?

Just when you think youve figured out the stock market it teaches you (AGAIN) that youre not as smart as you think you are. Yes, we are referring to ourselves here at this Technical Insights Blog. We had it all figured out...and then we didnt.

Having said that, we have not yet thrown in the towel on another rally attempt in the very near future.

This is what we are thinking...a very sharp rally into month end led by portfolio managers wanting to juice the returns of the already best quarter they have had in a LONG time.

Then, some follow through buying in the first week of the new quarter as funds try to get all their new inflows invested to keep up with performance of the S&P so they feel they will not be "chasing performance" for another quarter.

Then, once all the new money is invested and we are somewhere between SPX 950 - 1000 we will get another pause in the market. But this pause will not be met with another round of buying. Instead the market will slowly drift lower and eventually. as we approach the cautious month of September and the spooky month of October, the selloff will start to accelerate.

Anyway, between now and then (whenever "then" is) there will be plenty of long and short trading opportunities (longs will be opportunistic in nature and taking advantage of short term oversold conditions while shorts will be more technical in nature as stocks rebound into resistance areas or trend lines).

And for the Doug Kass issue - we have seen a pull back as he originally suspected (although saying he was not short still makes no sense) but not the 50 points he predicted...so this dispute isnt over just yet.

HAPPY TRADING!

POT...down 25% in 4 days!

Volatility in the overall stock market has picked up nicely over the past few days as converging trend lines from the May 2008 highs intersect the trend line connecting lows from March. As such the SPX has dropped from 940 area to a low of 903 this morning - or almost 4% in just 3 days. Support around 900 should hold in the near term but it seems the technical backdrop has changed and its possible we are setting up for a period of sell the rallies instead of buy the dips...the next week or so will surely give us a clearer picture.

As for specific stocks POT has gotten hit to the tune of around 25% in the past 4 trading sessions. Not that we like to try catching falling knives but this one has gone down too far too fast and and entry in the mid $90s (more optimally low $90's) presents a good risk reward for a quick +5% or so gain.

Proceed with caution and use tight stops if you have the stomach to trade this one. And watch for the overall market to lead this one higher over the next few sessions.

HAPPY TRADING!