Market Timing Pro

Beware the Third Wave Down

November 6, 2009

The S&P 500 Index (SPX), and it’s tracking ETF the S&P Deposit Receipts (NYSE: SPY), rebounded this week from a sharp sell off last week.

Although the gains this week, culminating in a 2% rally on Thursday, November 5, are a nice boost for the bulls, the stock market still has further to go before there can be any certainty the rally is back on track.

Right now about 50% of the losses have been erased, but around this level is where we expect to see sellers reenter if they are going to.

Typically the stock market corrects in waves of three. The correction lows last Friday would only be a single wave down. If this is the expected second wave higher, it will be followed by a third wave to new lows in coming days or weeks.

The SPX needs to break out to new highs before an all clear is given and that remains a long way away.

The http://www.fibtimer.com ETF Strategy has a position in the S&P 500 SPYDRs.

Shares of Biotech HOLDRS (AMEX: BBH) Reach Support?

November 5, 2009

Shares of Biotech HOLDRS (AMEX: BBH) have taken a heavy hit these past two weeks, but may have reached a short term support level.

After breaking to the downside from a pennant formation on October 21, shares of Biotech HOLDRS continued to fall until reaching a low of $88.89, some 15% from their rally high at $104.87 reached on July 30.

This low is a fraction above the critical 61.8% retracement support level at $87.95 for the March to July advance.

This is where Biotech HOLDRS would be expected to stop its declines and possibly to rally from.

However a decisive close below $87.95 would forecast a test of those same March lows, down at $77.50, so traders looking to profit from a bounce should maintain a buy stop under $87.95.

Kollar is editor and chief analyst at FibTimer.com (http://www.fibtimer.com) which offers market timing strategies for S&P and Nasdaq index fund traders, as well as bond, gold, small cap, sector, ETF and stock trading strategies.

Do or Die for Shares of Starbucks Corp (NASDAQ: SBUX)

November 4, 2009

Shares of Starbucks Corp (NASDAQ: SBUX) are between important support and resistance levels that will determine their course for the weeks ahead.

Starbucks has resistance at the $20.00 level, where the current declines picked up downside momentum. Starbucks also has strong support at $18.74, the closing lows for this correction. The $18.74 support is critical because it is where a rising trend line support, in place since the March lows, has stopped the recent losses.

Starbucks will move above or below one of these in coming days and the move is likely to determine the course of shares for several weeks at least.

A close above $20.00 should propel shares to a test, and possible breakout, of the prior 2009 highs at $20.94.

A close below $18.74 would likely doom shares to a test of the next support level down at $16.93.

The Fibtimer.com (http://www.fibtimer.com) Stock Timing Strategy holds a position in Starbucks.

Dell Inc (NASDAQ: DELL) Breaks Support

November 3, 2009

Shares of computer maker Dell Inc (NASDAQ: DELL) reached important support levels late last week and on Monday, November 2.

A week ago we wrote: “With the exception of one trading day’s intra-day lows, the $14.80 level has held all declines since Dell rallied last August. This should be strong support if we continue to see market weakness in coming days.”

Unfortunately for shareholders of Dell, support at the $14.80 level has been broken. The 50-day moving average has also been surpassed on the downside.

The next support level is the critical 61.8% support at $13.86, some 4% lower. If that level is also broken, share prices could tumble as low as $12.00 in coming weeks.

Kollar is editor and chief analyst at FibTimer.com (http://www.fibtimer.com) which offers market timing strategies for S&P and Nasdaq index fund traders, as well as bond, gold, small cap, sector, ETF and stock trading strategies.

Lower Lows Still Ahead for Stock Market?

October 30, 2009

The S&P 500 Index (SPX), and it’s tracking ETF the S&P Deposit Receipts (NYSE: SPY), had solid rallies on Thursday, October 29, completely erasing the previous day’s almost 2% losses.

A solid gain is always bullish, but there are reasons to be very careful here.

Typically the stock market corrects in waves of three. The correction lows on Wednesday would only be a single wave down. If this is the expected second wave higher, it will be followed by a third wave to new lows in coming days or weeks.

Another concern is the Nasdaq Composite Index (COMPQ) and Nasdaq 100 Index (NDX). These indexes rallied, but did not erase the previous day’s losses. In fact they both had “inside” days. Such days do not have highs or lows that exceed the previous day’s trading range. Such days are considered indecisive and not bullish.

Could Thursday’s rally be the start of a new leg up? Of course, but the markets are more likely to see another leg down before any lasting advance is begun.

The http://www.fibtimer.com ETF Strategy has a position in the S&P 500 SPYDRs.

iShares Russell 2000 (NYSE: IWM) Breaks Support

October 29, 2009

Shares of iShares Russell 2000 Index Fund (NYSE: IWM) have broken below several support levels.

On Tuesday, October 27 iShares Russell 2000 broke below its 50-day moving average. This is the first time shares have closed below this average since early July. In July, the break below was followed by a rally to new highs.

On Wednesday, October 28, iShares Russell 2000 closed below its most recent correction lows closing at $56.81. Those prior lows were at $58.00 on October 2.

These breaks of short-term support levels point to a test of the 50% retracement support for the July to October advance. This support level is at $55.00 a share. A close below $55.00 would point to a test of the 61.8% support level at $53.16.

Should shares manage to close below $53.16, we will be looking for declines to reach all the way down to the July correction lows at $47.27 a share.

iShares Russell 2000 has had numerous bouts of selling in its March to October advance. All have been short-lived. If any of these support levels holds, there could be a rally and new test of the October highs. But until there is a bullish reversal in iShares Russell 2000, the likely path is to lower lows.

The Fibtimer.com (http://www.fibtimer.com) ETF Timing Strategy holds a position in iShares Russell 2000.

Gold Shares (NYSE: GLD) Testing Support

October 28, 2009

Shares of Streettracks Gold (NYSE: GLD have declined to short term support levels after reaching new highs only last week.

After breaking the $100 ceiling, Gold Shares rose to a closing high of $104.26.

On Tuesday, October 27, Gold Shares retested the $100 level, which is also the 50% retracement of the October rally. So far this level is holding.

If $100 fails, there is a second support level at $99.50. After this, the odds will increase for a test of the October lows at $97.74.

If we hold at current levels, Gold Shares can make a run at the prior $104.26 highs. If surpassed, the target for Gold Shares will be $109.04. If Gold Shares can make a decisive close above this level, the next target is $119.98.

Gold is a volatile trading medium. We recommend limiting trading in this sector to no more than 5% to 10% of capital. Yes it is making new breakout highs, but gold can and has turned on a dime.

The Fibtimer.com (http://www.fibtimer.com) ETF Timing Strategy holds a position in Streettracks Gold.

Dell Inc (NASDAQ: DELL) Nears Strong Support

October 27, 2009

Shares of computer maker Dell Inc (NASDAQ: DELL are approaching levels which should offer strong support for this popular computer maker.

With the exception of one trading day’s intra-day lows, the $14.80 level has held all declines since Dell rallied last August. This should be strong support if we continue to see market weakness in coming days.

The 50-day moving average is now just above $14.80 a share, offering additional support.

If the stock market reverses higher, the $16.00 level is resistance and needs to be decisively surpassed for this stock to make a run for the highs at $17.00 a share.

The Fibtimer.com (http://www.fibtimer.com) Stock Timing Strategy holds a position in Dell Inc.

Momentum Rally Continues

October 23, 2009

Both the S&P 500 Index (SPX), and its tracking ETF the S&P Deposit Receipts (NYSE: SPY) pulled back mid-week sparking several analysts to write that a correction was under way.

Though the stock market may be over due for a correction as well as overbought, this is a momentum rally and no one can know how far a momentum rally will rise. They get their fuel from emotions and bulls will trample each other right to the final high.

Thus Thursday’s early morning sell off did not surprise us when it reversed and the markets stampeded higher into the close, erasing almost all of the previous two day’s losses.

Admittedly, momentum rallies always have a bad ending, but that does not mean we should ignore their profit potential as they continue to rise.

For the SPY, the widely traded ETF that follows the S&P 500 Index, the 50% retracement for the entire bear market decline is only 2.5% higher, at $112.31.

For the SPX, the 50% retracement for the entire bear market decline is only 2.4% higher, at 1119.31.

There are many technicians calling for a reversal and correction at that 50% level. That could certainly be the case but until such a reversal actually occurs, the trend remains up.

The http://www.fibtimer.com ETF Strategy has a position in the S&P 500 SPYDRs.

Dollar Tree Inc (NASDAQ: DLTR) Shares Break Support

October 22, 2009

Shares of Dollar Tree Inc (NASDAQ: DLTR) have broken below a rising trend support line that forecasts lower lows ahead.

Prices for shares of Dollar Tree have formed a pennant pattern (daily chart); with rallies ending at ever lower highs, and corrections ending at ever higher lows.

This pattern began back in early July at the correction lows. By connecting the declining rally highs and the rising correction lows, you form a pennant pattern with ever tightening support and resistance lines. This pennant pattern has now been broken.

Unfortunately for Dollar Tree the break out is to the downside and the almost four months long rising trend support line was decisively broken in heavy trading on Wednesday, October 21.

Initial support for expected continued losses is at $46.15. If that level is broken the next support is at $44.83. A break of this level would point to a test of the $40.50 level.

Kollar is editor and chief analyst at FibTimer.com (http://www.fibtimer.com) which offers market timing strategies for S&P and Nasdaq index fund traders, as well as bond, gold, small cap, sector, ETF and stock trading strategies.