Weekly Watchlist 12/28

Another short low volume week is ahead and it should be interesting to see if the SPX keeps grinding up on this low volume trade. I think it will. A positive close to last week should give us continued momo into the 1135-1140 area short term.

Last week the Nasdaq and tech related names rallied and led the way. If tech continues to move higher that is a positive sign into the new year as the market has been searching for a leader to ignite the next leg up if it is to come. Energy and banks have lagged this month but last week energy started to show some life and perhaps maybe financials are next?

Buy the dips>> PDE, VFC, TSL, ABV, TRLG

Weekly Watchlist 12/21

Going into a holiday shortened week we have a trading range still in place in the SPX. I think we stay in this range thru the rest of the year and find some direction once 2010 arrives. For now support remains at 1085 and resistance up at 1115.While banks and commodities have sold off, the tech sector has held up nicely along with transports. Until we get some kind of broad based move in all sectors then they will keep taking turns each week and the indices overall will consolidate further. Overall this has been a stock picking market with premium selling strategies doing best.

The dollar/stock inverse relationship has almost completely broken down and I think it is a positive long term sign to see stocks holding up and perhaps even starting to rally with the USD. Perhaps growth isn't that bad after all huh?

Buy the dips>> MSFT, VMC, SPG, NTRI

Sell the rips>> FCX

RIMM Call Spread

RIMM reports earnings after the close today and tomorrow is options expiration so that sets up a potentially explosive long gamma trade. Delta's of options will be either 1 or 0 at expy on friday's close and that means that stocks which have big moves this week can see the delta's of their options explode.

Usually I'm not a fan of buying spreads or options into earnings but for a gamble lottery ticket type of play with a great risk/reward this trade could pay off huge.

Buy the Dec 70/75 call spread for 50 cents.

By buying the 70 call and selling the 75 call you mitigate some of the risk of paying a premium into the number and you are only paying 10% of the potential $5 the spread can be worth on friday if RIMM goes to 75. That kind of move is entirely possible from a volatile stock like RIMM.

Of course if it does not clear about 70.50 then you lose money under that and you should be prepared to lose the entire 50 cents if RIMM does not get over that 70 mark tomorrow. But for the potential 10 bagger kind of trade I think this is worth taking with small size.

Weekly Watchlist 12/14

Stocks have held their own as the dollar rallied the past two weeks and commodities sold off fairly hard. The market seems to have leadership from transports and semi's along with some other tech. It has to be encouraging to see the market hang in this neutral range as the euro sells off the past few weeks. Maybe this is just the start of the dollar rallying with equities?

With the year end so close I find it hard to believe we sell off into a seasonal bullish time for stocks. FOMC meeting is this week along with quad witching expiration on Friday. There is plenty of open interest at the round number 1100 strike in the SPX options so it would not surprise me to see another rather flat week overall. At this point I would be more willing to be bullishly neutral. Which I guess means expecting a break of the highs but respecting the range.

The euro does look likely to test the 1.45 mark this week and gold has room down to 1080 which is the next major support level. The last month has seen different sectors lead at different times. One week tech leads and commodities lag, then the next week banks lag and transports lead. Until we can get a broad based rally then this rangebound trading may hold into year end. One thing for certain is that we have longer term resistance doing what it should do at these levels on the weekly charts. 1125 SPX is going to give us a hard time until it doesn't.

Buy the dips>> GD, M, TIE, ICE, HD, GVA, IYR, SLM

Sell the rips>> RIG, FXE

Weekly Watchlist 12/7

The reaction to bad jobs data 9 months ago rallied stocks but now are we seeing the stock market starting to sell off on good data? If so, this could be the first signs of the market leading the fundamentals. Regardless, Friday the dollar ended strong and stocks sold off before regaining some steam late in the day to still close over 1100. While I think this could be the start of another 5-8% correction the markets, you also gotta remember it is unlikely to see a sustained pullback before year end because of the "Santa Claus" effect in the markets and traders wanting to secure their bonuses that they receive. The "bonus" put in December they call it.

So we need to watch the potential for support to be broken on the SPX under 1085 to see a fast retrace back to 1070 where there is still an unfilled gap. But if we friday's lows near 1095 then I think we have yet another shot at retesting the highs of the brutal trading range we have seen for the last 4 weeks. We need to see the SPX close above 1120 for any kind of continuation higher.

I like the way small caps are setting up to run into year end and REIT's and Semis look strong as well. Some of the dollar sensitive names like oils and materials are vulnerable to further pullbacks at this point and I also would lean towards shorting pops in banks until they confirmed leadership. It looks like there is a nice rotation taking place into more defensive sectors into year end.

The dollar bounce does have the chance at being the start a viscious unwind but it's still a bit early to tell. Losing 1.48 level on the Euro would be a nice confirmation of a further move up in the dollar this week. There is not much econ data on the schedule so perhaps the currencies settle into a range for a few days to absorb the large movements seen friday after the jobs report.

Longs>> RIMM, FSLR, EK, LIZ, IYR, IWM, WYN, UCTT

Shorts>> WFT, ACI

Weekly Watchlist 11/30

Going into December the markets seem to be trying to put in some kind of topping pattern but they got way too negative too fast off the news from Dubai last week. Friday the market recovered some important overnight losses but more importantly the Euro regained the 1.49 area after a steep sell off. The currencies are still running the show and until the Euro has a close under 1.48 then I think it will continue up and you should expect shakeouts like last Friday. Same with gold and other commodities. Gold needed a sharp correction and it got that. The trend is up. The moves in gold will continue to increase in volatility as the price rises. Gold rallied up and thru my 1150 target I stated here in January and I still think gold is headed up and thru that 1200 mark I called for back in late Summer and even higher next year.

As for the SPX, we have 1105-1110 as a must close above area to continue a rally to 1120. If we clear this I think we have a good shot of seeing 1150-1160 for a year end rally. I really do not see a sustained move down coming before year end. Who wants to forgo those annual bonuses that are paid out soon? They will hold this market up thru Christmas imo. After that who knows but I think the media was just drooling for a story last week and Dubai gave them just that. Contrarian indicators are pointing towards at least a continued snapback higher.

Even if we are in the 8th inning of this bull run we gotta play until the last out and evaluate it as it changes. The 50 day ema on the SPX is still trending up and I think this is a very simple but important signal to focus on. One or two days does not make a trend. The trend is in fact up and even though breadth and certain sectors are fading with each new move up in the markets you cannot ignore the phrase.. "Market's will remain irrational longer than you can remain solvent."

The watchlist:

Longs>> APOL, LCC, JWN, FSLR, SINA, MNKD, EK, BONT

Shorts>> BBT

Currency Corner

I wanted to take a big macro look at the longer term weekly currency charts as I was starting to become a bit nervous of a dollar bounce since everyone is so certain the dollar is going lower and also we have Obama in Asia the last few days and why in the world would the govt want the dollar to be making fresh lows just as the President meets with the largest holders of our debt? Also, Bernanke is speaking on Monday morning so the slightest slip of words could be a catalyst to see action in the dollar. Of course Bernanke knows this and will be safe with his words since he has learned the effects of his speech intraday.

I have started to see some weakness in the oil sector and crude itself. I think oil should have rallied last week after testing the previous 77-78 breakout area. It did not end the week too bullishly and alot of the oil service names that we were very bullish on into the end of year ( ie. OIH, COP, RIG) maybe showing us some sloppy head and shoulders patterns. Now this could just be consolidation but if crude fails to breakout above 80 in the next week or so I think it has a good shot of actually correcting back to 65, which is basically where it should be (or even 50) if you do not factor in the dollar weakness since March. Supply is mounting and demand really isn't coming back full force into the holiday travel season. I think there is a good 15-20 bucks of premium in oil based solely on the weak dollar effect. Nevertheless, I think it will be important to watch crude coupled with the dollar into the next month to see the next directional move. IF THE DOLLAR BOUNCES then oil will probably tumble fastest.

As for the currency pairs, out of the following I think the British Pound (gpb/usd) is the most interesting. It has been stuck in a tight range on the weekly chart for several months and is poised to make a move once it breaks the range. It looks like momentum is to the upside right now so assuming the Pound can breakout above 1.68-1.69 on a weekly basis it could lead the Euro and other similar currencies higher, which of course means the dollar index will go lower.

The EUR/USD is for sure at interesting levels going back to 07 but for it go challenge higher areas I think we would all agree we need a weekly close above that 1.505 mark.

AUD/USD is not far off its 08 high of roughly 0.98 and that sets up a potential retest double top area since the current rate is not far off at 0.9338. The Aussie is of course a commodity currency like USD/CAD and even NZD/USD.

These currencies all look similar since the commodity rally has powered them higher.

The USD/CAD is at important support levels near 1.03. Even though support is here near parity if the commodity trade keeps up this CAD can continue to strengthen against the USD and go right thru parity. But I would expect some kind of consolidation here at least in the short term for USD/CAD.

USD/JPY is also near support between 87.5-89 and could at least get a bounce going into the last few months of the year back into the massive descending triangle that has formed during the last two years.

EUR/JPY is also very interesting to me here as it has formed a nice tight range over the last 6 months or so. This cross rate was an excellent measure of risk appetite back in 08 but has decoupled a bit imo. Even so, it has formed a big ascending triangle pennant with resistance up at 138-139. Currently at 134 this could blast off to 153 into early 2010 if it wants to breakout. Even though the risk measure isn't as tight as it used to be; we can still use this to see how likely the stock market is to rally.

And just for fun the last one is the USD/INR which is the Indian Rupee. If emerging markets are strong then this chart should be going lower (or the Rupee appreciates against the USD). And it looks like it has formed a big nasty head and shoulders on the weekly with a breakdown in the cards. This should mean that the BRIC nations will be strong into 2010.

Overall, looking at all these weekly's and your USD thoughts I think it is prudent to be expecting some kind of dollar bounce in the coming weeks especially since the sentiment is so extended to one side, however I think we are still early to predict a intermediate or major USD bottom followed by a rally.