InTheMoneyStocks Market Analysis

[InTheMoneyStocks]

Trade lesson: Stacking the odds in your favor

One of the best things a trader could have is multiple factors on the charts to increase the odds of a successful trade. Often many beginner or novice traders buy or sell a stock just based off one support/resistance level. While that is a start, the IntheMoneyStocks.com traders are taught to look for two or more factors to increase the odds of a winning trade.

For example, today we can look at an intraday chart of Wells Fargo (WFC). First, note the sharp decline on WFC into the 10 minute 50 moving average. This is generally as strong level of support. However, notice the 10 minute chart gap fill came into play at the 25.50 level. This is the second level of support. Third, it is also important to look at the 3:00pm EST pivot from December 13, 2009 serving as support as well. Here in one intraday chart we have three separate support levels that increased the odds of a successful intraday trade.

Remember the charts do not lie. Don't rely or depend on a lagging indicator or oscillators to make a trade. Go right to the horse’s mouth and trade price action. Remember what we say as ITMS traders, "buy support and sell resistance."

 

[InTheMoneyStocks]

Yields On The Rise

Is the bond market talking to us? The yield on the 10 year Treasury note is now at 3.61%. The 10 year Treasury note is by far the most important bond. Most of the mortgages are based off the 10 year note. The housing market is one area in the economy that is still facing major headwinds. Foreclosures and delinquent mortgages continue to rise. This fact remains even with the U.S. government offering an $8,000 tax credit for first time home buyers and the $6500 tax credit to anyone that buys a house. One can only think that the government and the Federal Reserve Bank do not want to see a rise on the 10 year Treasury note.

Yields have been exceptionally low for quite some a while. However, there was something interesting that we noticed. The last time the 10- year yield hit 4.00% was in early June. This happened to coincide with a one month stock market pullback into July 10th 2009. This was the longest pullback in the stock market since the March lows. Did the 4.00% yield really affect the stock market in this negative way?

There is an old saying on Wall Street that says 'the bond market knows best'. This could certainly be the case. The 10 year bond could be hinting that rates need to go up. What would happen to this stock rally if rates go higher? What is going to happen to the housing market if foreclosures and delinquencies continue to rise? Eventually the Federal Reserve bank will be forced to raise rates on would think. Remember the bubble that Alan Greenspan caused by lowering the Fed funds rate (overnight rate from the Federal Reserve Bank to large banks) to 1.00%. The current Fed Chairman Ben Bernanke has lowered rates to 0-0.25%.

What happens from here? Is there another bubble in the making? These and many other questions remain to be seen. We shall all find out soon enough.

 

[InTheMoneyStocks]

The Producer Price Index Pops...Will The Federal Reserve Play Ball Or Drop The Ball?

The Producer Price Index (PPI) showed a stronger than expected increase which tells of inflation pressures on the producer side of goods. Later this week we will get the Consumer Price Index (CPI). With inflation creeping back into the picture, the dollar spiked higher as expectations that the Federal Reserve will have to raise interest rates. This would help curb inflation pressures in theory. However, the Federal Reserve has some major problems. Essentially there is a major black hole and a huge catch 22. If the Federal Reserve does not raise interest rates, inflation may run away and considering we are showing little or no growth in the economy, we could be in the worst possible situation with Stagflation. Stagflation is when there is inflation and no growth or slowing growth. This kills the consumer because without growth, wages stay the same yet buying power gets hurt. Ultimately, it makes the consumer much, much poorer.

Major leading stocks continue to be very weak telling us the internals of the market are not strong. Apple Inc. (NasdaqGS: AAPL), Goldman Sachs Grp (NYSE: GS), JP Morgan Chase Co. (NYSE: JPM) and even Exxon Mobil CP (NYSE: XOM) are all lower and have been lower a majority of the day. The market gapped down but then staged an impressive mid morning rally to go to gap fill. However, these leading stocks told top traders at InTheMoneyStocks.com that the rally would fade. Sure enough, the markets are hovering back down, just off the lows of the day. The technology filled Nasdaq is the strongest index of the day, just down fractionally. The dollar PowerShares DB US Dollar Index Bullish (NYSEArca: UUP) rallied off the PPI data as the squeeze continues on the dollar. The UUP has major resistance between $23.00 and $23.12 on the charts. Should that level hit, expect a pullback in the dollar and commodities to get a bid.

So what is keeping the Federal Reserve from raising interest rates then? There are many answers to that. First and foremost is political. There is a lot of pressure on Ben Bernanke to keep interest rates low to help growth come back. Do not think that President Obama does not have Bernanke on speed dial and even though the Federal Reserve is supposed to be independent, it clearly is not outside the realm of influence by the government. The second more important issue is what happens to housing if interest rates rise. Housing is still at the bottom with prices in many areas down more than 50% from the highs. If you raise interest rates, less people can afford to buy houses and it will start another leg down on housing. If the housing market does not come back, the economy will not either. More foreclosures, more short sales, it will continue to spin out of control.

In addition, President Obama has been up in arms over the lack of lending being done by the major banking institutions. There is one easy way to solve this. Increase interest rates. This is so obvious it almost knocks your socks off. Interest rates are so low there is absolutely no incentive for major banks to lend. Instead, they can get guaranteed returns from treasuries or other safe investments. If you were told you could lend to a consumer for 5% and take on a huge risk of default or lend to the government and get a guaranteed return of 3.5%, which would you do? That small different is not worth the risk. If you increased interest rates these banks would have a major incentive to lend due to increased profits.

As you can see, there is really no right answer. It is just a matter of deciding which is the lesser of two evils. Either way, there are more problems ahead. The Federal Reserve and government are making them last longer as well due to their print trillions of dollars policy. There is no way this economy does not see massive inflation down the line in 5-10 years. In the near term, I do believe there will be muted inflation because you still have a deflationary environment due to the housing collapse and the credit crunch. However, that will not last forever.

The next bubble is in treasuries and the US dollar. While other countries start to default on loans and debt payments, the US will be immune due to its long lasting safety net it has built. However, eventually it will become the biggest default in history.

Gareth Soloway
Chief Market Strategist
InTheMoneyStocks.com

 

[simbob]

Re: Can the market rally with a stronger U.S. Dollar?

Looking to economic figures the EURUSD exchange rate will be soon or late. 1/2

What could be possible reasons to see stronger USD in the future ?

 

[InTheMoneyStocks]

Dollar Down, Oh It's Fed Day.

Recently the markets have rallied on the day of the FOMC announcement. The market knows the Federal Reserve Bank is not going to say anything to spoil the apple cart. They have been more than accommodative by keeping the Fed funds rate (overnight rate from the FRB to the large major banks) at virtually zero percent. Some would argue that these efforts have saved the financial system. This comes even as banks are still not lending. Well who is really qualified to get a loan anyway with unemployment at 10 percent? While the U.S. Dollar is near all time lows it is important to remember that this helps to boost U.S. exports. The question is what exports? The U.S. manufacturing sector has shrunk by 80 percent over the past 20 years. It is still surprising that with all the mathematicians, statisticians, Ph D's, MBA's, and every other title that no single person is seeing this explosive government spending and money printing as a problem in the U.S.

Today the highly read Time Magazine announced that Federal Reserve Bank Chairman Ben Bernanke is the man of the year. He is being honored as the man that prevented the second "Great Depression." It's amazing that the world thinks things are back to normal. Well at least the media who reports the news thinks so. People seem to forget that Ben Bernanke was around when Alan Greenspan lowered rates down to 1 percent in the early 2000's causing the greatest bubble (credit and housing bubble) in 70 years. Now Ben Bernanke is following the same recipe with low rates. One can only wonder what kind of bubble comes out of this one.

Here is some irony for us all. The President was given the Nobel Peace Prize despite being in two separate wars. Some would find this rather disturbing considering it is a peace award not a killing or death award. Then Time magazine gives their "Man of the Year" award to Ben Bernanke who helped cause the huge financial crisis along with former Federal Reserve Board Chairman Alan Greenspan. Goldman Sachs is also giving out nearly $20 billion dollars in bonuses this year despite being bailed out by the U.S. government one year ago. One can only wonder if Charles Manson is due to receive the Congressional Medal of Honor, or tiger woods receiving the Husband of the year award.

The markets are all positive, trading higher as the dollar is lower. Technology stocks such as Apple Computer (NasdaqGS: AAPL), Google (NasdaqGS: GOOG), and Research in Motion (NasdaqGS: RIMM), are leading the NASDAQ. Other market leaders such as Goldman Sachs (NYSE: GS), and Exxon Mobile (NYSE: XOM) are also trading higher on the day giving the markets a broad based rally ahead of the FOMC announcement.


Nicholas Santiago
Chief Market Strategist
www.InTheMoneyStocks.com

 

[InTheMoneyStocks]

TRADE LESSON: Beware Of The Higher Open

Many traders and investors have been buzzing about the Research in Motion (RIMM) earnings. Every financial website was making a big fuss about how they knocked the ball off the cover and may trade higher to the moon. As a trader we simply view all of that as noise and want to tune out the news that you hear. It is more important to just find the support/resistance levels on the charts.

This morning we alerted our traders that RIMM should pullback from the open. After scanning the smaller timeframes we navigated to the daily chart and noticed a very strong lower gap window at 71.42 going back to September 25th, 2009. By simply identifying this resistance area it told us that the odds favored a pullback from that level. Gap higher moves usually retreat into strong resistance and this was text book play.

 

[InTheMoneyStocks]

Market Update: Options X Friday Caps Off Wild Week With Great Swing/ Day Trading Move

After a harsh continuation sell off on Wall Street early in the day, the markets have slowly headed back higher into the 50ma. The dollar has done the opposite of the market by spiking higher early, then heading back down. There is a nice bullish in spirit of flag pattern currently in formation on the SPY intra day chart. It has been a wild and crazy week in the markets. Perfect for options expiration quad witching. Many thing the holidays were going to be slow but it has been the exact opposite. This last week was the best swing trading and day trading market in months. It will continue. Be ready and understand what is happening to maximize profits in the new year.

 

[Gabrial]

Re: Dollar Down, Oh It's Fed Day.

Dollar down is already valid since years and looking to US economic numbers i am sure the USD will stay weak.

Personally i would be not surprised when we see exchange rate from 2/1 against the EUR.

 

[InTheMoneyStocks]

Holiday Party May Be Starting As Alcoa Inc (NYSE: AA), Amazon.com, Inc. (NasdaqGS: AM

The markets are moving higher today on the back of solid moves from Alcoa Inc (NYSE: AA), Amazon.com, Inc. (NasdaqGS: AMZN), Intel Corporation (NasdaqGS: INTC) and JP Morgan Chase Co (NYSE: JPM). Volume has started to trail off and is expected to starting around 10:30am ET each day this week. This is due to traders leaving early for the holidays and the lack of news after the morning session on Wall Street. This week we will see quite a bit of economic news, but it is all pushed into the pre market session or the 10am ET time frame. Once 10:30am comes around, traders will be essentially done for the day.

Alcoa Inc. is higher today after a major deal with Saudi Arabia worth 10.8 billion dollars. In addition, Alcoa was upgraded by Morgan Stanley to overweight. While this upgrade is interesting to say the least, I believe it has come very late to the party. It does appear AA may have a little more upside but I would begin to use this upward momentum as an opportunity to unload positions. A pullback to $12 or below would be much more appealing.

Amazon.com Inc. is having a solid day on the back of a blizzard that buried most of the north east of the United States. The key here was to recognize the snow storm was coming on Friday during trading hours and see that there was a high probability that it would cause an extra influx of online shopping. Near term, this seems to be boosting Amazon.com. While Amazon.com seems to be having a solid day, I would expect the pull back to continue after the holidays as profit taking continues. I think there is a large chance Amazon.com will pull back to the $110.00 level before being a solid entry once again.

Intel Corp. is also one of the key DOW components keeping the markets up. It is up more than 2% on the day. Intel Corp. was raised to overweight from equal weight by a Barclays Capital analyst. This stock has been in a choppy trading range technically speaking. Being range bound, it may be in a consolidation pattern for a break out. However, watch the key $21.25 level. I would be mildly warm on this as the range from $18.50 to $21.25 looks to continue into the new year.

JP Morgan Chase Co. is also helping the DOW and the markets head higher. Along with Goldman Sachs Grp (NYSE: GS), the financials are having a strong day. Over the weekend, comments were made from Barrons that the finanicals may have a bright future. JP Morgan Chase Co was highlighted as being the front runner to profits down the line. Citigroup Inc. (NYSE: C) was noted as being the worst. While the financial stocks have pulled back off their highs, technically speaking, it bothers me the markets have not followed. The financial stocks continue to be a leading indicator to this market. Be aware that their weakness may be a signal of a 10% correction coming in January and February.

Gareth Soloway
Chief Market Strategist
InTheMoneyStocks.com

 

[InTheMoneyStocks]

New Home Sales Data Could Spell Trouble For TOLL BROTHERS INC (NYSE: TOL), KB HOME (N

New Homes Sales dropped sharply by 11% today as it appears home buyers who wanted the $8,000 tax credit by the end of the year have already completed their purchases prior to the government extending the credit. Before the government extended the credit, there was a mad rush to complete purchases to take advantage of that benefit. Now, just like Cash For Clunkers, there is no incentive to buy thus buyers are going to take their time until late next year when the credit is due to expire again. This will put a lot of pressure on stocks like TOLL BROTHERS INC (NYSE: TOL) and KB HOME (NYSE: KBH). Inventories of homes in November were at 7.2 months supply which is equal to the supply in October. This is also a key number to watch. As inventories drop, home builders will have to start building again as supply decreases. That is not happening.

I expect the weakness in home sales to continue into the first quarter of 2010. This will have a negative impact, not only on home builders directly but also suppliers of building materials. HOME DEPOT INC (NYSE: HD) and LOWES COMPANIES (NYSE: LOW) have both outperformed the market recently spiking to 52 week highs. Both these companies could be in for a rude awakening as the housing recovery has yet to really take hold. I have to be bearish on them at these levels.

The success to the housing recovery also hinges on interest rates. Remember, getting a low mortgage rate is directly tied to interest rates that the Federal Reserve states. The higher interest rates move, the harder it will be for someone to afford that monthly mortgage payment. Therefore, there will be quite a bit of pressure on the Federal Reserve to keep interest rates where they are. Should interest rates rise, the housing market would most likely continue to remain on the bottom if not head down even further.

Please note the ugly situation the Federal Reserve is faced with. Inflation may start to creep in but if they raise interest rates, they kill the economy and the housing market. What do they do? Most likely the wrong thing as they have throughout history. As we all know by now and my partner and I stated years ago when we called for the collapse of housing and the financial system in 2006 and 2007, Alan Greenspan essentially caused the housing bubble to form when he dropped interest rates to save the market after the Tech Bubble burst. One bubble after the other. What is the next one? Treasuries!

Gareth Soloway
Chief Market Strategist
InTheMoneyStocks.com

 

[Dentalfloss]

Re: New Home Sales Data Could Spell Trouble For TOLL BROTHERS INC (NYSE: TOL), KB HOM

how cash rich are the other homebuilders..??

 

[InTheMoneyStocks]

Pure Lack Of Respect As Gov't Lifts Cap On Freddie Mac (NYSE: FRE) and Fannie Mae

Once again I find myself furious at the disrespect the treasury and government give the average American. The Obama administration, thinking the average U.S citizen may be too dumb to find out, slipped a new tidbit of news under the nose of the markets. What news you ask? The treasury lifted the bailout cap on FREDDIE MAC (NYSE: FRE) and FANNIE MAE (NYSE: FNM), the two mortgage behemoths. This was done obviously to keep them from failing as it appears the depth of the losses continues to grow.

It actually does not infuriate me that they had to lift the bailout cap. Simply put, it is the way they went about it that makes me want to move to a beautiful Caribbean island, far, far away. How dare they? How dare they slip this news in the afternoon on Christmas Eve? When people were with their families, buying gifts, good will to men? Looks like we were all a little more generous this holiday season than we thought. There goes more of your hard earned tax dollars. You thought you just spent $500 or $1,000 this holiday season? Looks like the government decided you should spend much more than that! Again, I say how dare they! Fine, bail them out. But at least have the decency to do it in front of our faces. At least have the decency to stand up like a MAN and tell the American people what you are doing! It is unreal, thinking the market and the average American would not notice.

This government should be ashamed of itself. Dumping news like that on the market on Christmas Eve when the average American is paying more attention to their family for once than making a living. I hope an uproar is made across the United States. I hope that millions read this, and millions more hear about this.

 

[sahajtrader]

Re: Pure Lack Of Respect As Gov't Lifts Cap On Freddie Mac (NYSE: FRE) and Fannie Mae

It's within their "inhuman" rights I suppose!

 

[kasparov11]

Re: Pure Lack Of Respect As Gov't Lifts Cap On Freddie Mac (NYSE: FRE) and Fannie Mae

What is all these sentimental BS in the business world, what is wrong with you?!

The bail out program has been successful, even taxpayers are making some money out it. Fre and Fnm are 2 elemental companies that gave root to the problem we have nowawadays. It is imperative that the government get these companies get back on track, the government would take a lot of criticism if they let them go under, that is why i put a lot of money into these companies.

 

[InTheMoneyStocks]

Spend to the end

The markets have floated since the Santa Claus rally began early last week. The volume has been extremely light and this does give the market a slight upside bias. Remember the old saying, never short a dull market. Well, this market has been very dull if you go by the current volume. Many stocks have screamed to new highs for the year such as Apple Computer(Nasdaq:AAPL), U.S. Steel(NYSE:X), and Simon Property Group(NYSE:SPG). This is the Santa Claus rally that everyone looks forward to every year. The one problem this year is the market has rebounded over fifty percent for the year already. What is left in the tank?

The last time we had a bounce of this nature was in 2003. At that time the market rallied from a March pivot low into the end of December. Will history repeat again so soon? Back then many believed it was the start of the new bull market. The Federal Reserve Bank Chairman Alan Greenspan had lowered the Fed funds rate(overnight lending rate from the Federal Reserve to the large banks) to 1.00 percent. This caused a boom in commodities and inflationary stocks. It also made capital easy to borrow. This in return caused the great credit and housing bubble of 2007.

What is one to expect now? The current Federal Reserve Bank Chairman Ben Bernanke has lowered rates to 0-0.25 percent. This type of policy in rates is usually a bubble maker, however, with 10 percent unemployment who is really worrying about inflation. It seems like the U.S. Treasury and the Federal Reserve Bank are trying to defend against deflation. Remember Japan has been in a deflationary tailspin since 1988. This was when the Nikkei index was trading as high as 39,000. The index now trades at 10,000 and has been much lower last year. The point here is that deflationary economies are hard to fix. The U.S. looks to be attempting a print and spend methodology. Print more money and spend everything that you print.

It is important to remember the one factor that helped the Japanese citizens was their high level of savings and their low debt. The U.S. consumer is really just the opposite. Most Americans have high debt and very low savings. This is a reason for caution. Many talking heads are saying the worst is behind us and the new bull is in effect. Similar words were spoken in 1930 after a 50 percent rebound as well. Remember what the famous writer Mark Twain said, “history does not repeat exactly, however, it does often rhyme.”

 

[InTheMoneyStocks]

Metal Stocks Poised For 10% Or More Correction In Early 2010 After Massive Runup

It has been a move for the history books. Stocks like United States Steel (NYSE: X), Alcoa Inc (NYSE: AA), Titanium Metals Corp (NYSE: TIE) and Century Aluminum Company (NasdaqGS: CENX) soaring into the end of 2009 like a rocket ship headed for the stars. Just in the last month or two, these metal stocks have ripped higher by 25 - 50%. It now looks like they are coming into massive resistance levels and I am issuing a red alert sell signal.

Based on valuations, growth projections and technical extensions above key levels, these stocks have been added to my red alert drop list. I expect them to see 10% or more corrections in the near term of January. Already today, United States Steel has started to form a daily bearish candle along with Alcoa Inc. U.S Steel has rocketed higher since the hit of the 200ma on November 3rd, 2009 at $34.00 to a high today of $58.19. It is far above the 20ma and after a four day surge, multiple indicators are showing a January or sooner correction coming. Look for price to fall back to the 20ma.

The same can be applied to all the other stocks listed. The extension moves they have had were due partly to short squeezes and partly to momentum runners as hedge fund and money managers looked to show these in their portfolios for year end statements. Come January or sooner, I am issuing a red alert sell signal on all these stocks. Be smart, learn the technicals, understand the fundamentals and go the opposite of the crowd. Learn, Live, Profit!

Gareth Soloway
Chief Market Strategist
InTheMoneyStocks.com

 

[crude_lover]

Re: Metal Stocks Poised For 10% Or More Correction In Early 2010 After Massive Runup

It has been a move for the history books. Stocks like United States Steel (NYSE: X), Alcoa Inc (NYSE: AA), Titanium Metals Corp (NYSE: TIE) and Century Aluminum Company (NasdaqGS: CENX) soaring into the end of 2009 like a rocket ship headed for the stars. Just in the last month or two, these metal stocks have ripped higher by 25 - 50%. It now looks like they are coming into massive resistance levels and I am issuing a red alert sell signal.

Based on valuations, growth projections and technical extensions above key levels, these stocks have been added to my red alert drop list. I expect them to see 10% or more corrections in the near term of January. Already today, United States Steel has started to form a daily bearish candle along with Alcoa Inc. U.S Steel has rocketed higher since the hit of the 200ma on November 3rd, 2009 at $34.00 to a high today of $58.19. It is far above the 20ma and after a four day surge, multiple indicators are showing a January or sooner correction coming. Look for price to fall back to the 20ma.

The same can be applied to all the other stocks listed. The extension moves they have had were due partly to short squeezes and partly to momentum runners as hedge fund and money managers looked to show these in their portfolios for year end statements. Come January or sooner, I am issuing a red alert sell signal on all these stocks. Be smart, learn the technicals, understand the fundamentals and go the opposite of the crowd. Learn, Live, Profit!

Gareth Soloway
Chief Market Strategist
InTheMoneyStocks.com

this is all wrong, around this time and early january all metal realted stocks will have big movements as this is the time of the year when the orders for metals start coming in from asia (mainly china) as the biggest suppliers globally in metals this is what is going to effect the price movements or anything related to metals.

Do not trade off resistant levels etc now lol this is the worst thing you can do these stocks wont react to levels or resistant they will react to the respone on metals from china in 2010, forget levels look at stockpiling.

 

[jaspertrademaster]

Re: Pure Lack Of Respect As Gov't Lifts Cap On Freddie Mac (NYSE: FRE) and Fannie Mae

This administration does plenty of things it should not. More than not now it is done quite overtly like bribing legislatives to vote for national health care.

 

[InTheMoneyStocks]

Re: Metal Stocks Poised For 10% Or More Correction In Early 2010 After Massive Runup

Note: US Steel has already dropped $1.10 from the above alert. Looks like bearish call was dead on $$$

 

[dimsdaletraders]

Re: Metal Stocks Poised For 10% Or More Correction In Early 2010 After Massive Runup

yup. And my broker won't let me trade it, so I'm just enjoying watching it fall and thinkin about how pleased I would be right now if I was on it. *g*