Wang's Happy Trading

Written by Luck-O-Irish

Hi, all! Since Happy is in Lake Tahoe vacationing, he asked me to be one of the guest bloggers tonight on Wang’s Happy Trading!

High volatility continued into Tuesday as saw the Dow triple digits up AND down in the SAME day.

The market started the day by gapping higher fueled by strong earnings from HPQ. The overall market began to fade before lunchtime, and continued on a steep slide into negative territory into the release of the Fed minutes and with the weight of FRE’s disappointing news before the market open. The market rallied sharply in the last hour to finish in positive territory. The Dow closed up a little over 50 points; SPX gained 6.43 points; the Nasdaq inched up 3.43 points.

Surprisingly the VIX decreased 4.34%. USO (oil) made strong gains up almost 4%. The continued talk by OPEC concerning a move away from the dollar has put continued pressure upon the dollar and pushing oil higher. Oil looks to be making another possible run at $100 per barrel, but I would not expect to see it on the trade shortened week. Sector performance was mixed. Commodities were strong as GLD, GDX, and XME moved strongly to the upside along with FXI (Chinese ADRs). SWH (software), BTK (biotechs), and INX2 (internet) eeked out some unimpressive gains. The SOX (semiconductors) were led down by AMD and MU. The area of greatest concern appears to be the continued breakdown of XLF and XHB. Both sectors achieved new 52 week lows today. In the last 6 months, the XLF has fallen more than 20% and the XHB is approaching a 50% drop.
Some other sectors of interest include seeing strength return to the Ag sector, where some of our favorites (AG, AGU, BG, CF, MOS, and POT) saw big gains. AAPL, BIDU, GOOG, ISRG, and RIMM all saw moves to the upside as well. On the flip side, solars and shippers were VERY weak with CSIQ, ENER, FSLR, JASO, LDK, SPWR, STP, TSL, and WFR were ALL to the downside on the solar side.

The SPX was able to climb back up to 1439.70. The SPX seems to demonstrate the markets split personality. This level may now act as either the support or resistance level for the SPX. We’ll have to wait another day to see what the market does for the rest of the week. If it doesn’t bounce above 1440, the next support level is at 1410.
Today was a quiet trading day due to market volatility and uncertainties. Short term opportunities do not offer the same risk-reward scenario during these whipsaw days, especially when volume is low, such as we are seeing this week during the holiday. Today was more a day of banter and community as the more experienced traders kept cash levels high and trades to a minimum. Patience will be rewarded when the market demonstrates conviction in one direction.

BCIS jumped on a strong earnings announcement, and HPQ helped buoy the technology sector and near $50 per share today. FRE dropped sharply after the federally backed mortgage company announced steep losses and a dramatic drop in the value of its holdings. Freddie posted a loss of $2 BILLION! Shares of several homebuilders also fell sharply as SPF (Standard Pacific) approached penny stock land down almost 20% to $2.31 per share. This stock traded at $40 per share less than 2 years ago. HOV was also down sharply. It may not be long before we see one of these two former billion dollar market cap homebuilders files for bankruptcy. Another subprime mortgage lender, NFI, is inching closer and closer to bankruptcy, and I’m not certain we will see it survive the year. If the market can continue to buck this constant barrage of negative financial news, then perhaps we can establish a bottom, and start another leg higher.