StockTiger Stalking Stocks for Monday August 30, 2010 The leading stock market newsletter.

Growth. "Despite the weaker data seen recently, the preconditions for a pickup in growth in 2011 appear to remain in place..." so said Federal Reserve Chairman Ben Bernanke on Friday. Maybe his words or the lack of some others helped the markets do what the charts suggested would take place and rally off the lows of the week. Most of what he said was not backed up by any hard data such as, "Stronger household finances, rising incomes, and some easing of credit conditions will provide the basis for more rapid growth in household spending next year." Not sure where he thinks these stronger finances and rising incomes will come from with the growth of unemployment, greater number of home foreclosures and shrinking GDP we have now. Maybe those things will happen but the Fed is not even sure what they will do. Mr. Bernanke added, "The committee is prepared to provide additional monetary accommodation through unconventional measures if it proves necessary, especially if the outlook were to deteriorate significantly." They are however stuck on what to do as he offered, "FOMC "has not agreed on specific criteria or triggers for further action."

We realize that the Federal Reserve is not a government agency as it is a private corporation owned by commercial banks but it is still their job to do, as the masthead of their website declares, "..provide the nation with a safe, flexible and stable monetary and financial system. And after all of what has happened they get to keep their jobs- go figure.

Anyway we did bounce off off some quite obvious support points on the charts we will show below.

Both the S&P 500 and the Dow are near their downtrend lines from August 10 as seen on the 60-min charts. If they do break above these lines, a typical target would be a 50% retracement of the total pullback this month. For the S&P this would be to 1084 with lower resistance at the38% retrace at 1073.

The 38% on the Dow is at 10236 and 50% at 10328. Shorts will logically attempt entries at the trend line and these other levels.

Week ended August 21st jobless claims came in at 473,000 from the previous week's revised figure of 504,000. The 504,000 figure though is adjusted as the real figure for that week on an unadjusted basis initial claims fell 22,650 from 424,506 to 401,856. This current report unadjusted, totaled 380,935 in the week ending Aug. 21, a decrease of 23,613 from the previous week. There were 457,269 initial claims in the comparable week in 2009.

The second quarter GDP was revised even lower than previously stated. They now say the growth in GDP was 1.6% from the earlier estimate of 2.4%.

The Commerce Department said Wednesday that new home sales fell 12.4 percent in July from a month earlier to a seasonally adjusted annual sales pace of 276,600. That was the slowest pace on records dating back to 1963.

US existing home sales dropped sharply in July. The sales of the month is 27.2% lower when compared to June following expiration of the home buyer tax credit. According to the National Association of Realtors figures, it is the lowest in more than 10 years with an annualized rate of 3.83 million.

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Oil was the leader of this weeks indices. The S&P down for 3rd week in a row - first that has happened since January.

Their is no significant space weather in the forecast at least until September 20 strong enough to affect the market but I did notice this unsettled geomagnetic field condition on Saturday on the moon page.

The Arms index again hit a high intraday on Tuesday and as every other time this year when that happens we soon get a rally. We just do not call it an omen.

This 60-minute multi index chart shows the the Russell 2000 was the leader in breaking out of it treading channel followed by the Nasdaq. The others are close to doing so.

The weekly Dow chart with a hammer candle just under the 50-week EMA With three weeks down maybe we can have one up in front of the holiday weekend.

This daily Dow chart shows the bounce right at the parallel channel trend line. This support line had no other touches but only being parallel, yet it worked out.

This chart is a 60-min Dow futures chart showing 6 days. The right hand side is this week's low and the green line is the Pivot named S1 or the first level of support using this pivot point criteria. You can look at the other days and see how many times this lines line up with price moves. So on Thursday when the price got to the S1 we saw that it was also right on top of the descending yellow trend line so a very low risk entry point. It is low risk because it has more than one support and because it is an obvious one, there is a good chance of many seeing it. When an entry point is clear you can set a stop pretty close so if the trade goes the wrong way you are stopped out for minor losses. In this case one could set a risk of maybe 10 or 15 points down (depending on how you use stops) and a possible gain of 100 or a couple of hundred points as if this is a short term bottom it could rally to the 50% retrace on this chart. At any rate if you have multiple contracts you can sell some on advances. We posted this chart as it was hitting and it turned out to be the low to start the rally. Especially if you are a futures trader you can appreciate this type of high reward to risk set up. One way that many find increases their profits in trading futures is to only trade when a set up comes to you. We have often showed in 15-min charts using RSI and other standard indicators how waiting for turning points for entry has very good results. From this low to the close on Friday was over 200 points or $1,000 possible profit per e-mini contract. If you had 10 it was a good day.

The 3-line break chart is slow to react so is good to shut out short-term noise. So far it is is still on a sell.

If the economy was improving we should see the transport rising and they did close off their lows but still down for the week.

The Nasdaq closed just under resistance. Note the moving averages are getting close together and there may be a spike up or down when they meet.

New highs on the Nasdaq on Friday were 20 while new lows decreased to 71. The rally started when the number of new lows became elevated.

The Nasdaq Summation index is slow to change and is still on a sell, Its changes in direction generally last weeks so a one day rally does not affect it.

The 30 minute S&P 500 chart, like the Dow also hit the topside of the trend line which became a buy point. It is now just under another trend line and if this one is broken will be another buy point.

I saw a chart-of-the-day chart last week that showed the PE of the S&P inflated to levels of 50 or more so this week I checked the Standard and Poor's website and downloaded the earnings spreadsheet. When you figure a PE you can use past earnings or future ones to get a projected PE. Usually the past 12 months are used but some prefer to use the past 10 years and divided by 10 to even out the ups and downs. Here are the past real reported earnings from 2006 to the present and the projected ones through 2011. For 2010 which is half way real - we have a guess at total earnings of $83.04 or $70.36 depending if you use top down or bottom up figures. We will use the lowest in this example.$70.36 projected earnings and a Friday close of 1064 gives us a a PE of 15.12 or pretty standard on average. Remember though that in recessions the lows often drop to single digits before a lasting bottom is on place. If earnings were at $70 and a PE of 9 was reached it would have the S&P 500 at 633. If earnings were $83 with a 9 PE the S&P would have to go to 747. As there has not yet been a test of 667 the 2009 low - both of these scenarios are in play. So a key is to have cash available when lows do come and do not hold stocks when they are dropping.

60-min S&P as it closed over the 38% retrace from the August 19 high and is EMAs crossed over suggesting at least the 50% at 1070 will be tagged.

Russell 2000 daily gave a good showing to start with on Thursday but gave ups its gains only to come roaring back on Friday with a 2.8% gain. Note the moving averages crossover.

The simple 15-min Russell buy/sell system started with the quick whipsaw but is back on buy.

The 30-year bond yield drop to the 62% retrace with a yield of 3.46% at its low on Friday then rallied back up to close at 3.69%.

Meanwhile the 10-year note yield moved up strongly over 6% to close at a yield of 2.65%.

The homebuilders index stays under the 50-day EMA and at the same basic level it based at for over a year.

The Bank index had its RSI dip below 30 and on Friday it rallied back up to under the support line. If it moves up it has another resistance line shown.

Gold daily chart consolidating not far from testing its June highs and for the week was up just under 1%.

The gold commitment of traders from Tuesday shows that the commercial traders have been increasing their short position.

This chart like most of ours is a Linear chart. If you do not know what that is you can read about at this link to fool.com. On this chart all looks peachy as gold bounced right at the trend line.

For several years I almost always used Log scale (Logarithmic) charts as they are very useful when we have big swings in stocks as it has the effect of compressing the chart height. So this is the same gold chart but in log scale we see that it broke below the trend line and has rallied back up underneath it. This is a typical place to short so it is advisable to pay attention to this chart also as if there is a break of this lower line it may turn out that this version is in play.

The gold cloud chart has moved over resistance so now the top of the cloud becomes support.

The gold and silver index is stocks based and is heading toward the top resistance. The lower portion of the chart is the GDX to gold metal ratio and it broke over its trend line and is bullish for gold stocks as they are outperforming gold metal.

The daily chart shows the trend line break with a possible short term topping candle on Friday so may need some consolidation.

Palladium sits just under a possible break level but the two most popular palladium stocks PAL and SWC do not at the moment have very appealing charts.

Copper bounced at the 50-day and could make another try at the top. Often copper rallies when there are real sign of an improving economy. In this case it must be based on foreign demand or hopes of it as we do not see big increase in demand in the US.

The US dollar ETF UUP is in between the 50 and 200-day EMA so could break either way short term. Longer term we expect it to move up for quite a while.

The similar chart showing the dollar index as it sits just under the 38% retrace. A break over should take it to the 50% at 84.37. If it does that we expect that the market will be declining.

Here is a list of stocks reporting earnings on Monday. We will put the ones during the week on the blog. Check the updated Earnings Calendar

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This week we had some nice break outs - these first three were on Friday.

We often say that when the moving averages cross - sometimes it can cause FIREworks. Super- two days in a row so was good to tale more profits. .

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

TIBX Over $14.37

SINA had a nice break on Friday and if it gets over the high of $43 with good volume may test the $46 high

POR At the end of July had a bullish moving average crossover and now a break would be over $20.40.

PEGA Over $23.10 would put it with the red candle on the left and good volume could move it to $25 or higher towards the gap.

ISLN over 20.30 but as it is an island it may not be a long term as a break out will likely have to be tested.

ETR over $80.09

CWTR over the 200-day at $5.13 or the $4.93.

CRR over $77.40

BCSI now at the trend line so over it and then over the 50-day and horizontal at $21.00.

ARGN over $11.24

For your eyes and mind

Photograph by Heather Hartkamp

Heather Hartkamp.jpg

Photograph by Spencer William Micka

Spencer William Micka.jpg

Photograph by Lajos Hajdu

Lajos Hajdu.jpg

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

Check the Earnings Calendar on all overnight holds.

Check the current message center also for other good stock candidates as there are several there right now.

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