Market Musings

Well, Fifi's prediction of a market turnaround is holding water or “eau” as she would say. The S&P 500 has been oscillating slightly around the 1345 level, unlike yesterday's wild 30-40 point swings from the open. The VIX has settled back down from its recent high two days ago of 37.50 to around 28. I won't feel confident about dipping my toes on the long side until the VIX settles below the 25 mark--if it falls below 20, then I truly think the market (and the economy) will be out of the woods for a while, but who knows when that will be?

Although all of my investment decisions are based purely on my own technical analysis and fundamental research, from time to time I do listen to CNBC and read other financial newsletters and blogs, basically as an excuse to avoid having to work and to keep out of Fifi and Dimitri's way. (Dimitri is my sullen trading strategist whom I'll introduce later.) Anyway, there's been talks of consolidation in the airline and banking sectors, but so far I'm not terribly thrilled with what the charts are showing me. Both the XAL and the BKX (the airline and banking indices respectively) having been falling with the major markets in recent months because of the current economic conditions which everyone knows about and of which I'm not going to rehash. My focus is from a purely technical standpoint.

Regional Banks are showing signs of a turnaround. I wouldn't jump into any of them until market conditions improve, but for all of you party-hearties out there, the ones that have exhibited the best performance in recent days are the following: PVTB and CNB today made minor break-outs; CASB, BBT, COLB, FULT, BXS, UMBF, and SST all have made great gains and some are nearing their break-out points; DRL has been a steady climber for a while and though it hasn't made any spectacular moves, it hasn't given up much, either. It staged a break-out today as well.

Money Center Banks (i.e., the larger banks and multi-nationals) are doing a bit better than their regional peers. The foreign banks especially are out-performing US based banks, and many of them gapped up in today's trading action. Most notably, BBV and WFC are looking strong; BCH and USB look good, but they are more volatile stocks. For those of you chomping at the bit to buy Citigroup (C), I'd stay out of it until it broke resistance around 31.50.

Bright spots in the Investment Services sector include JNS and AMG which are enjoying a few days of decent gains after a long period of suffering. The gains look to be more than short-covering, but as Fifi reminds me, looks can sometimes be deceiving. IBKR has been in a long-term uptrend and is up today, but to my seasoned chartist eyes, if it doesn't manage to break it's previous high of 34.15, then it could be shortable if it falls below the $30 level. NITE has also been doing well and is under heavy accumulation. The volume today has dropped off and with the topping tail, it looks like it might be running out of steam, at least in the short term, so if you're looking to buy it, you might want to wait a few days.

I'd still stay out of the Homebuilders, although DHI has made an impressive comeback recently and today broke minor resistance, although on light volume, so beware! On the insurance side, LFG broke out today on heavier than average volume.

Market Beaters: Only two stock charts look interesting today. The first is IDIX which has almost doubled in price since the beginning of the month. It broke to a new all-time high of $5 today, albeit on lighter than normal volume. The second is PTEC which jumped over 18% in the past two days and broke to a new yearly high today on much heavier than normal volume. This stock has a history of making huge short-term gains followed by longer periods of steady declines, so be nimble and set strict stop-losses if you're planning on trading this puppy.

Market Losers: Almost forgot to include these! In down markets, I try to pick five shortable stocks, but today could only find three that piqued my interest: SBKC, SURW, and ALO. They've all been in consistent long-term downtrends, and if you're thinking of playing these to the short side, just make sure there are no potential upcoming market-moving events (earnings releases, FDA drug approvals, etc.) From my years watching biotech stocks, they can be a potential time-bomb when it comes to shorting because of take-overs, FDA approvals, new drug research data--you name it!, so do so at your own risk. Please.

That's it for now. Dimitri wants to show me the preliminary results on a new strategy that he's working on that he says are intriguing. It may be his Russian nature, but he tends to get over excited, so well see. I'll let y'all in on it a little bit later.

Posted by Dr. Kris at 12:26pm PST