Penny Stock Explosion Report
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PENNY STOCK EXPLOSION REPORT August 8, 2009
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DJIA: 9,370.07 10-YR TSY: 3.85% CRUDE OIL: $70.57
COMP: 2,000.25 GOLD: $955.40 $USD INDEX: 78.94
S & P 500: 1,010.48 SILVER: $ 14.60 VIX: 24.76
"There is only one side to the stock market;….not the bull side or the bear side, but the right side. It took me longer to get that general principle fixed firmly in my mind than it did most of the more technical phases of the game of stock market speculation."- Jesse Livermore
US MARKETS:
Greetings stock fans. The major indices continued their advance into higher ground this past week as buyers remain in control of the tape/action. While many, including ourselves, have sought/expected some type of pause/consolidation from ‘overbought’ conditions, as we noted in last week’s scribe, “overbought can become more overbought, just as oversold can become more oversold”. And such development, is exactly what continues to take place throughout the landscape. Mr. Market marches to his own drummer. Thus, despite one’s thoughts/believes, it’s prudent to cast aside such opinions and allow the tape to ‘do the talking’.
As a result, the major averages put in another strong performance after pausing ever so mildly the week prior, where both the DJIA and S&P 500 tacked on gains of 2% this past week, while the COMP pressed higher with a 1% advance on the heels of better than expected economic releases/reports which fueled the speculative juices of both investors and traders alike.
With that said, the markets have and continue to power ahead from their oversold readings in March. While the initial turn of events were precipitated via oversold conditions, as well as a powerful ‘short squeeze’, what we ‘appear’ to now be witnessing is perhaps a bout of ‘performance anxiety’, whereby those whom found themselves on the ‘sidelines’ in cash awaiting some form of pullback/pause/consolidation of the power thrust into greener pastures which has as of yet to materialize, are now putting capital to work in fear of being left behind. Hence, the inability for this tape to ‘catch its breath’ as demonstrated by the chart below:
As the picture above portrays, the sprint from SPX880 in early July, which has now proven to be a ‘failed’ H&S (Head-and-Shoulders) pattern and most definitely a ‘bear trap’, has been impressive and powerful. Despite overbought readings in the RSI at the 70 level and the MACD ever so slightly beginning to trend lower, the tape has not allowed for entries at lower prices thus far which in our view, has prompted and maintained an underlying bid on the tape.
Therefore, the benefit of doubt remains in the hands of buyers and until or unless proven otherwise, we’ll continue to acknowledge and respect the action while monitoring for subtleties in potential change of direction which has as of yet to occur!
GLOBAL MARKETS:
It was a week of ‘pause/pullback’ for Asian markets/bourses this past week with the region succumbing to slightly lower prices when the final curtain was drawn. As we noted to readers a few weeks ago, it appeared/s, from our perch, that many Asian markets were approaching potential resistance areas, not to mention cries of ‘froth’ from many pundits in the region, which may have contributed to the weeks performance or lack thereof. In any event, we’ll continue to monitor the action for clues as to whether we’re witnessing just a pause/consolidation or, perhaps the beginnings of something more meaningful. Stay tuned. Moving on to Europe, the CAC; DAX and FTSE posted gains for the week as we continue to monitor the potential inverted H&S patterns (bullish) development. Should these patterns successfully materialize, higher prices are more than likely in the offing, yet should such developmen
ts fail
to prevail, one may want to become a bit more guarded/cautious. Continue to keep a close eye!
ts fail
to prevail, one may want to become a bit more guarded/cautious. Continue to keep a close eye!
BONDS:
It was a big week in Treasury land where bond prices ticked lower and yields on the 10-Yr Treasury rose by 35bps (3.85%) with investors/traders exiting the ‘safe haven’ of treasuries for that of equities. ‘Risk appetite’ certainly seems to have reappeared; however, we remain range bound within the 3.2%-4% zone. Thus, no real change from a ‘big picture’ perspective until or unless either end is overcome or breached.
METALS:
Both Gold and Silver continue to display favorable characteristics where the ‘yellow metal’ finished the week pretty much where she started ($955.40 +.09%), with Silver putting in impressive/solid gains of 5%, closing the week out at the 14 handle ($14.60). While we maintain our stance that much higher prices loom in the future for both metals, at present, the Gold/Silver ratio remains high in our view (from a historical perspective) at a reading of 65:1 and we suspect that to narrow in time. Hence, we feel/believe that while both metals will outperform, Silver is and has been our preference in terms of relative returns and will garner/deliver larger gains from a percentage basis. Once again, all pullbacks in physical and or shares, with a preference to Jr.’s, represent buying/accumulation opportunities
CRUDE OIL:
Crude continues to trade within our defined range of $55-$70 bpl with ‘black gold’ finishing the week with a 1.5% gain ($70.57). Last week we noted that should Oil (WTIC) be capable of going ‘topside’ of the $72.50-$73 zone on a ‘closing’ basis, we suspect that further advance is in the cards. While crude is ‘knocking on the door’, it as of yet, has not opened. Thus, pay close attention to this level. In the meantime, status quo!
CURRENCIES:
After breaching support on Friday 7-31 at the 78.5 level, the ‘greenback’ found more selling pressure this week where the $USD index dropped to the mid 77 level before recovering to close the week with a gain of 8% (78.94). Was the breaking/breaching of support a ‘false’ maneuver a la ‘head fake’ or, merely a ‘bounce’ from oversold levels? While no one knows for sure, we suspect the latter due to the action in the metals which did not blink as a result of the intra-week turn of events. Having said that, we cannot discount the fact that the $USD index did indeed recapture the 78.50 level on a ‘closing’ basis and may well have a bit more upside before resuming the primary trend, which is lower. Keep an eye on the 79-80 level for upside potential, where the declining 50-day MA resides. On the down stroke, the 76 level may provide a short-term net of su
pport
should the 78.50 figure give way yet again in the days/weeks ahead.
pport
should the 78.50 figure give way yet again in the days/weeks ahead.
US Markets:
Short-Term: Bullish- Positive Bias- Extended
Intermediate-Term: Bullish- Trend Continues To Improve
Long-Term: Bullish- SPX 1,000 Has Been ‘Re-Captured’
(Yet, within the confines of a secular-Multi
Year Bear based on Weekly charts)
POTENTIAL INDICES SUPPORT/RESISTANCE:
SUPPORT RESISTANCE
DJIA: 9,200; 9,000; 8,750 9,400-500; 9,660; 9,800
COMP: 1,965; 1,945; 1,890 2,000-10; 2,050; 2,070
S & P: 975-80; 950-57; 932 1,000-8; 1,045; 1,073
POTENTIAL SET-UP’S:
LONGS:
Acco Brands Corp. (ABD) 4.83; From here back to 4.20 and more aggressively above 5.07
Buckeye Technologies Inc. (BKI) 7.65; Back to 6.75-7 range and more aggressively above 8.40
Eastman Kodak Co. (EK) 4.28; From here back to 3.60 and more aggressively above 4.60
Navisite Inc. (NAVI) 1.54; From here and more aggressively above 2
Pacific Sunwear of Cal (PSUN) 3.83; From here back to 3.50 and more aggressively above 4.90
SHORTS:
Not much has changed with respect to the landscape on the short side as favorable; high reward/ low risk set-ups remain elusive throughout the tape. Certainly opportunities present themselves on an intra-day/scalping basis; however, as previously noted, this tape has yet to show any real sign’s of ‘leakage’ and those whom have attempted to ‘pick a top’ have suffered severely. With that said, we present you with two (2) potential opportunities on the south-side. Just remember to keep your STOPS tight should they turn against you and, you may want to consider Put options as opposed to outright shorts in order to define your risk!
Autozone Inc. (AZO) 151.32; From here and more aggressively on a break below 144.50
Intercontinental Exchange Inc. (ICE) 93.60; Break below 90 and more aggressively below 88
****We hope that you are catching some of the Massive Break-Out’s such as MEG; PAL; SKS this past week****
Have a profitable week of trade!!
**** Remember to please visit our website for Full Disclaimer****
Penny Stock Explosion
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