StockTiger Stalking Stocks for Tuesday September 7, 2010 The leading stock market newsletter.

Rest day. In the 2007 newsletter we noted: This holiday began in 1882, originating from a desire by the Central Labor Union to create a day off for the "working person". It is still celebrated mainly as a day of rest and marks the symbolic end of summer for many. 2007 dow chart

Labor Day became a national holiday by Act of Congress in 1894. Also in that news letter was this chart of the Dow as it closed at 13357 giving up about 100 points in the last 15 minutes of the day but still closing up 119 points on the Friday before the holiday weekend. This year we beat that with the Dow closing up 127 points for the day. For the week the Dow was the under-performer moving up 4.6% while the Russell 2000 led the way with a gain of 7.2% . One may imagine that some change must have taken place in the economy or at least in the mood of traders. There was news and maybe better than some expected but still not good news, the type that may move the market. This started the Thursday before as we showed in the morning video last week and in last week's newsletter. When the S&P 500 tested 1040 and passed the test it meant the buying could begin. Then came this week's new month inflows and empty desks on wall street as traders were on vacation and mix that with short covering and we get a nice rally. Later we will show why this rally may continue for weeks to come but in the shorter term we expect a pullback. You know very well that if these same traders who were in the Hamptons go back to work Tuesday that if they wanted to be long they would sure like a better price. IF they can't get it than we could see some bigger moves up as underperformance is a fear that can drive money manager to buy at higher prices just to be invested. You can use ETFs to manage swings and partial profit taking to build cash on up moves gives you money to buy more if they pullback to supports.

One negative this week was the volume however as it shows no real buying interest. This chart is the Nasdaq weekly for the past 17 months and the volume blue line is the 50-day average volume and this week did not even make it that high. We can say that it was because of the pre holiday and summer, besides, people were on vacations. This is true and in the run up from a year ago maybe not every week made it to the 50-day average but for an extended move we want to see more volume.

The Bullish percent indicator for the Nasdaq does show a rise this week but this chart gives a bit of perspective too.

Here are several charts from this weeks announcements. There have been some improvements in the economy since a year ago but the numbers of unemployed continue to rise as the labor pool increases each week. Some companies do have a lot of cash as with less workers to pay they made more profits. But they are not using their cash in ways that help the economy in pbuilding, investing or creating new businesses. The money is sitting or in some cases just buying other existing companies which often ends up in laying people off as they merge workforces. There are reasons to be happy though as we not only shared the market turn at the bottom and featured it in video and newsletter but this week has 27 new stocks hit their buy points and produce profits and that is why we are here.

Non-farm payroll employment fell by 54,000 jobs in August and as some expected employment to fall by about 120,000 jobs this was good news. The US needs to create about 150,000 to 200,000 jobs each month the US needs to supply between 150000 and 200000 new jobs to just maintain a steady unemployment rate due to new people entering the workforce. charts below from rttNews

While employment fell by less than expected, the unemployment rate still edged up to 9.6% in August from 9.5% in July.

First-time claims for unemployment benefits were down a bit in the week ended August 28th with the decrease offsetting an upward revision to the previous week's data. The Labor Department said that initial jobless claims edged down to 472,000 from the previous week's revised figure of 478,000.

Labor productivity in the second quarter fell by much more than had originally been estimated. The report this week showed that labor productivity in the second quarter fell by a revised 1.8% compared to the previously reported 0.9% drop. Meanwhile the Labor Department said that the increase in unit labor costs was upwardly revised to show 1.1% growth compared to the more modest 0.2% increase that had been reported previously. The upward revision to the pace of labor cost growth was in line with economist estimates.

An index of home purchase contracts for previously owned dwellings unexpectedly increased 5.2% in July over June, the National Assn. of Realtors said Thursday, a modest note of good news for the U.S. housing market. The pickup in contracts, which typically take about one or two months to convert into closed deals, or sales, follows two consecutive months of declines and a report last week that sales of previously owned homes plunged 27.2% in July.

ABC News reported on Tuesday that its weekly index of U.S. consumer confidence fell in the latest week, remaining deeply in negative territory. The ABC Consumer Comfort Index fell to -45 for the week ended Aug. 29 from -44 in the previous week. a separate report - But in another report - The Conference Board Consumer Confidence Index® which had declined in July, improved moderately in August. So take your pick consumer confidence is either up or down.

The Institute for Supply Management's "Purchasing Managers Index," which reflects the percentage of purchasing managers reporting better business conditions than in the previous month, registered 56.3 percent, up from 55.5 percent in July, and the 16th consecutive month of readings over 50 percent, a level that indicates growth in the manufacturing sector. There are many questionable things about this repot on one can google it learn more.

This chart and others are at the website of the Federal Reserve Bank of Minneapolis and it shows the 11 recessions since World War 2. Across the bottom are the number of months since the beginning of each recession and vertically is the percentage change in employment. The black dots are when the recession officially ended, and this current recession, though officially has ended, has had the largest decline in employment while the others had by this many months already gone back to their starting employment levels - except for one from 2001.

We do not know when the market pullback will be - maybe Monday maybe later in the week - and we do not know how much it will be but keep some ETFs on hand to use for at least short term trades or to hedge against any open long positions. FAZ the 3X bear financial ETF is getting oversold and nearing a possible support. watch for this to reverse with signals from our usual indicators as circled.

The 3-X bear small caps is also nearing support. RSI is not totally oversold as yet but Williams and stochastics are in that area. Of course futures are another way to trade a pullback with leverage and controlled risk by entering close to supports or resistances on reversals or break out/down moves.

This is a 10-year look at the same indices. IF you were a buy and hold type your are up 40% in 10 years withe the mid caps, 19% in small cape but underwater in the Dow and S&P 500. Gold is up 350% and oil up 119% - however with all of these you lost 38% as the dollar is worth so much less. Really time to get rid of the Federal Reserve System as it is a complete failure.

The multi-index 60-min chart with horizontal lines from the high at August 17-19. The Dow is just under this resistance while the Nasdaq, Nasdaq 100 and SPX are above it. The Russell 2000 gapped up and filled its gap but left one below which we are sure will be filled. The Nasdaq/Naz 100 have gaps now above and below.

The daily Dow chart has now moved up and over the 62% retrace rom the August high to August lows. If it moves over the 10480 it has a pretty good chance of testing the 10720 high as often when a price gets over 62% it ends up testing the highs.

The 3-line break chart of the Dow did give a buy signal on this mechanical trade. This is not a quick signal but it is helpful for spotting tends that are longer then a coupleof days.

The transportation index bounced off its 50 and 200-day EMAs and has the same resistance it had at 4524.

The utilities average broke out above its horizontal resistance and now over the top Bollinger band.

The Daily Nasdaq is a closer view of the top line of thetriangle which is also at the lower Fibonacci line so pretty strong resistance.

New highs in the Nasdaq continue to climb and new lows diminish. Lows Friday were 19 and this sometimes as you see has been market tops though on this chart time framearing in April there have been times when they went as low as 4.

The NASI has ben very good and pointing out direction changes. It is slow so does not move quickly - thereby missing tops and bottoms but if moves are longer term this can produce very good results.

The Arms index - TRIN - again by a spike up suggested a move up in the markets. Readings above 5 may be more significant but it does at least alert you to a possible volatile move ahead. Now this has very low reading so especially if it drops more is warning of a market pull back. They don't talk of Richard Arms - the inventor of this - instead they talk of the Hindenburg which is not very useful or accurate.

This longer term T inspired by T theory work of Terry Laundry uses the summer 2007 high of the S&P 500 as the start of the left side of the T. As there were two highs in that time period we used the area between the two so it is not exact but it was also a low in the Chaikin money flow. The center of the T is obvious as we are using the price in this construction instead of typical advance/decline or other oscillator. The distance between the center T and the left if equal to the current side would end this T around the start of October. As this started 3 years ago and because of our variable staring point - the ending point is not exact but there are other timing cycles point to that date also.

Renko chart for the S&P 500 and you see the lower blue indicator giving a buy at the bottom - note it is not at the the top, No guarantee it will get there but you can see how often it does.

This 15-min Renko chart got you into the S&P at about 1045 to 1050 and it closed on Friday at 1104 so a 54 point gain. The S&P 500 e-mini futures pays $50 per point so this move so far with a profit of $2,500 per contract. Sometimes, as a 15-min system the trades are close together and low profit or los but often enough are the larger swings. If you would like to try futures trading for free see later in the newsletter.

This 60-minute chart also has a mechanical crossover system which can be whipsaw-ish at times but helps in determining moves as it did here. Note the RSI has returned to overbought so watch the channel as it is near the red line resistance also.

The cloud chart for the S&P 500 shows its cleverness - the S&P was up against the top cloud resistance on the close of Thursday so to avoid such resistance it just gapped right over it on Friday. This is actually not uncommon.

The percentage of issues (stocks and bonds and non producing companies) on the NYSE now trading over their 50-day moving averages is 73% which is not a topping amount as we often see 90%.

After the July buy signal this NYSE summation index never shifted to a sell signal as it is a slow indictor that is good to filter market noise but short term is not so useful, Perhaps we will find that this, as in the past was good by eliminating multiple trades during this time.

The monthly chart of the Russell 2000 reminds us not to be too excited as it is not even back up to last month's high.

The simple little mechanical Russell 2000 system helpful for futures trading gave a buy signal at about 610 and at the close on Friday was up 33 points from there or $3,300 per contract. This is why when there is an occasional whipsaw with this it is not too important a as larger swing can pay off so well and often there are one of two good swings per month..

The retail holder RTH was looking like it may drop right out of a bear flag and damper upcoming holiday shopping season but made a comeback this week. The volume however was lighter than in the weeks of decline.

The banking index made a move similar to what it did in early July then again in the second half of July. It is just under the 50-day EMA and if it moved higher has the 200-day sitting right at the second downtrend line resistance.

The Market Vectors Russian ETF is back above the 50 and 200-day moving averages and close to downtrend line resistance. The indicators show that it is not overbought and MACD just crossing over.

The London Financial Times FTSE shown with a ribbon of moving averages as it just folded over which is bullish if it expands. The top of this envelope Bollinger bands is about 100 points higher.

Crude oil is weak as it sits under the broken trend line. At some point it should continue the correction started in 2008.

The commitment of traders report show that the commercial traders added 19 thousand short side contracts this month whike the large speculators added 16 thousand longs.

We are showing the log scale version of gold as a reminder that it could be this version that unfolds. Meaning that if this is a broken trend line and the latest move is just testing the line from underneath, then we would expect a fall. The last decline did not take it to the 50-week ENA as it had in the past but revered a little higher. If we do see a reversal, this time it may make a better test of that line.

On the daily gold chart it is in a pretty steady rising channel so as long as it stays inside all is ok but would not like to hold if it falls below this channel.

DGP is a double long ETF for gold and it broke over resistance a 3 weeks ago and continues its climb.

Gold and silver index is right up against resistance so it may be building strength to try a break out. It could also fail as that is why it is called resistance. The lower part of the chart show gold miners GDX compared to the metal and after a test of the trend line the ration has gone back up which signifies that mining stock are outperforming the metal itself. We have several god and silver stocks on the watch list and all tiggered so some new buy points may present themselves.

GDX renko 60-min chart gave a sell signal this week. It was tentative at first, meaning the CCI crossed over but not the SAR - well it ws on and off - anyway if it turns out to be whipsawish one can always sit out the trade if in doubt as there are often clearer signs at the top and bottom of moves. At the same time for at least 2.5 yerss thsi has done well through it all.

Silver weekly chart using this alternate trend line shows that it is at a resistance though RSI and stochastics are not over bought in this time frame .

The daily chart of silver is overbought and it is at the horizontal resistance. This does not mean that it cannot thrust through or maybe more likely just gap over, but one may use that situation to tighten stops or take additional profits as it will pullback at some point. We showed the AGQ double silver ETF to trade the price of silver at the triangle break at $61.75 and it hit $70.00 on Friday and in over bought territory so tighten stops.

We showed the Palladium futures chart last week as it looked like it may break out yet the two popular stocks PAL and SWC at that time did not look so good.

That changed quickly and PAL set up nicely and did break out of this level on Friday and SWC broke out on Thursday.

UUP a double long ETF for the US dollar has pulled back to the gap. This is sinking as the equities' rise so if there is a pullback on Monday in equities this may bounce. It does look though that this little gap could get filled . When the correction is over and the equities market has topped we expect to see a continues longer term rise in the dollar.

The US dollar at the 200-day EMA and former support. Stochastics gave a short term sell signal on a crossovers several days ago. If support here holds or not depends a lot on if the US market will continue higher with a spurt or will it consolidate or pullback.

A longer view of the US dollar on a monthly curved line chart which may contain the price if this ends up being a multi-year move.

Butch Cooley Market Comments (Butch is founder of Leg Up House and has been an active trader for decades.)

I have gotten so many emails in the past two weeks, that I decided to write something in response to the so called Double Dip, that so many are concerned about. Going back to 2007, where I think the Great Recession actually started, the world monetary system has just fallen apart. And everyone has an opinion about what has happened and what is going to happen. I just write what I “see” and that's my only agenda, other than I invest money to make more money. Or at least, that's the idea. But we seem to quickly forget that every analyst on CNBC has only one agenda, and that's to sell their product. And everyone has an agenda.

Do you recall the deep V recovery? That was all people talked about in 2008-2009. Well, it's 2010 and that subject isn't being discussed much. Now the talk of Wall Street is a slow, steady recovery, one that is going to take time. I guess that's “U” recovery? Or maybe an “L”. And there is some discussion of the “Square Root” looking recovery. The idea of the Double Dip is just another theory to consider.

But think for a moment that no one really knows what is coming. Not really. We make money by investing and we all use basically the same tools. One of those tools is stock charts. And my charts only go to today, and there is nothing to the “right” of that chart. But there are leading indicators and they give us the edge. That's about as far as anyone can actually see into the future.

But I think the biggest concern in the US economy is still the housing market. We have lots and lots of pre-existing homes out there, and they are pretty cheap. Yet, no one is buying them. Credit and lending is part of the problem no doubt. Mortgage rates are really low. We have mortgage modification programs. But still housing is in a deep slump. The problem is home sales are weak to almost non-existent. Fear? Yeah that would be my guess. Foreclosures are still happening at an alarming rate, and simply hurt the individual and add significantly to an already high housing inventory. So having all these “old” houses for sale also kills the construction of new houses. And that hurts jobs. Remember, housing is basically what started this mess....remember the bubble?

This also stresses home prices, making it very hard to sell a house today. If you are in personal financial trouble, selling your house is one way out. But if you can't sell, then you face foreclosure and the problem simply gets worse. For many, your house is your single biggest investment in life, and with home prices dropping, your overall personal financial value is effected negatively. So we spend less and attempt to save more. When we draw back on the money we spend, investments suffers. Money stops moving at a rate that becomes negative to a healthy growth rate. And money is not moving in this economy. When money isn't moving, there is less money. Right now, in this economy, there is no money.
For about 10 years, our country moved on a system of increased debt. Easy credit, credit cards, home equity charge cards. People were flying high and living the good life and paying the minimum each month. Our gains came from the stock markets and increasing home equity. Today, your $400k house is worth about $250k, you probably owe more than that on it, so you are underwater. You couldn't sell it if you tried. So if you have a job, you “hunker down”, keep what you have, and attempt to pay down your debt load. If we have enough people doing that, and I think they are, then more money stops moving. And the economy suffers. Consumer spending is negative, business spending is negative. No one wants to put anything on the shelf and certainly hiring is out of the question. And the talk this week is unemployment could take a series of jumps in the coming months and hit the 10% mark. Well, we all know that number is whatever you want to make of it. But for real, the number of real unemployed people is over that already, and probably closer to 20%.

It's also prudent to consider this is a big election year. I rarely get into politics when I am trying to write about investing. And I won't do that now either. It's just safe to say, Congress probably won't enact anything major regarding the economy until after the elections. Real business revenues are pretty flat. Believe me, GM isn't selling too many cars, even in China. United Technology isn't kicking out engines for Boeing, CAT isn't really selling too many bulldozers, and just how much paint do you think Lowe's is selling? It's still about cutting costs to increase corporate bottom lines. And these corporation probably are sitting on a boat load of money, cash. But they are not going to spend it, so what difference does it make? So let's just say revenues are flat? Consumers aren't spending, business isn't spending (investing) so our GDP is not going to 5% any time soon. And growth most definitely “can” go negative from here.

And then there are the banks. Remember them? None of them are “writing down” lately. That seems to be a forgot art form. Mark to market took care of that. But there still is no transparency. I don't know how much debt these banks are carrying. I suspect it's huge, maybe humongous? I know a lot of them still owe TARP money. But they are all reporting great earnings. Keep in mind, originally TARP was going to take the toxic assets (I love that saying!!) off the bank books. But for a number of reasons, mostly political, that didn't happen. Instead we gave them all a big shot of cash. So bet me, those “assets” are still out there. And our regional banks are still getting shut down, at what I call alarming rate. I suspect that rate is directly proportional to how much money is available to the FDIC?

So housing is in trouble, and I don't see anything in the near future to indicate it's about to improve. Foreclosures will increase. The number of people getting home mortgage adjustments has decreased. That system simply isn't working. Mortgage-backed securities, particularly commercial securities are a mess. Demand for products are weak, because consumers are wary and staying home. Property values drop, so the value of the so called assets that back these mortgages are dropping too. I think, eventually, and soon, banks will have to take another round of write downs (losses). If that happens, credit freezes completely again, and growth turns negative. 1.6% is a drop from earlier numbers and projections. And the projections for the future GDP are just not good. I think the Fed is stymied. There certainly appears to be a lot of disagreement in that group of late.

And we need to take a good look at what happened earlier this summer in Europe. Investors got scared and growth went negative. Those investors wanted much higher rates of return on government bonds. And those failing countries were in deep trouble and seriously strapped as to how to pay these debts and interest back. Default of a country was on the table if you recall. The EU Zone steps in, puts up a $1 trillion euros and countries announce “austerity”. Yeah, that ought to work out huh?? Spending cuts and tax increases were next. And this also has a negative effect on growth. So how can this “solution” work? Well it probably can't. The USD appreciates, hurting our exports resulting in bigger trade deficits. So that leads to more cautious consumers. And we as a nation sell less at a time that we were needing to sell more.

But even that scenario gets worse...or at least it could. What happens if the US debt becomes an issue, such as it did in Europe? Is that even possible? Sure it's possible. Fear makes anything to do with money possible. Will our debt interest rates jump dramatically? I don't know for sure, can't see that far, but I know they sure can. What hurt Europe was the uncertainty, fear, in their political process. And we have some “uncertainty” in ours too. Yeah, it could happen. Some where near 50% of our debt rolls over in the next 3 or 4 years. There's pause for some thought. And what do we do, raise taxes, announce our own “austerity” plan? Maybe, but we could also offer more tax cuts. But it won't happen until after the elections. So, can we actually see a double dip? Sure. Fear, uncertainty, lack of money in our wallets, more fear. Sure, it can happen. I just can't see that far over the horizon.

Here is a list of stocks reporting earnings on Tuesday and Wednesday Monday. Check the updated Earnings Calendar on all overnight holds.

This week's economic calendar for the USA.

Volatility mean opportunity for futures trading and it is free to try it out.
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Note: on the site pages on the top menu we now have Live Charts. These update themselves and we have several of the popular Ninja Trading mechanical trades that many have used over the years. We also have FAZ and FAS in 15, 5 and 1 minute variations as well as The Dow and others. They do dot yet all fit on the menu so look on the SRS 15-min chart on the top right menu. We have also added free image hosting to the Extras menu.

New additions to our watch list We add many stocks to it each trading day.

BEBE Over $6.26

TBI The last two times that this ran up on high volume it soon pulled back. A break out on good volume over $14.01 could be cautiously traded but perhaps could also be a short on a pullback as it is in overbought territory. Though it is always good to check news on shorts.

MTSN Over $2.50 though experienced may work between current price and there.

HTCH Over $3.45

DLX Over $18.62 or 50-day EMA at $18.74

DE Over $69.50

CPE Over trend line at $4.25 or $4.30

CBEY Over 50-day at $13.50 - there will be resistance at the trend line if it gets there.

For your eyes and mind

Photograph by Randall Scholten

Photograph by Kyaw Thar

Photograph by Aung Pyae Soe

That's a full lid for today - have a great week.

Check the Earnings Calendar on all overnight holds.

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