Weak Risk−Reward Either Side of the Market

• Jack Steiman, On Weak Risk-Reward Either Side of the Market (SwingTradeOnline.com)

The bears are trying. I'll give them that. After all, they've taken out the 50-day exponential moving average on the Nasdaq and have kept it below for a few days now. The S&P 500 is playing leapfrog with the 50-day exponential moving average. Above. No below. No above. No, on it. Ridiculous really.

The Dow refuses to breabut clearly is the least important of the major indexes as it's only 30 stocks. However, it is important to some degree and they just can't take it below the critical 50-day. So yes, the bears are trying, but overall, still failing to break this market in a fashion that suggests something much worse is on the horizon. I would be convinced of that if they could break all of the 50-day exponential moving averages and then run with it. In other words, break the 50's and then slaughter the bulls. Not happening right now. No evidence that it will. 

The daily charts remain oversold as do the short-term charts. When MACD's get compressed such as they are on the short-term charts and those compressed MACD's are confirmed by oversold oscillators on the daily charts, it is very hard to get sustained downside action. Again, the same reminder, markets go up far more than they go down, and when you get the daily and short-term charts at oversold, you are not likely to get too much more selling unless the market is about to get slaughtered, and that's just not in the cards. Can the S&P 500 fall another 2% to 1020 massive support. Sure. Much beyond that I don't see it near term. If we get down there, we will have massively compressed charts everywhere that would snap soon thereafter. As far as longs go, many more stock charts are starting to break down and any move up will have big gaps to deal with and that makes sustainable upside extremely difficult.

Can you say cash? Sorry folks, but that's the way it is. It'll change but it is the right way to play in my mind.

Massive support is at 2040 Nasdaq, breached a few times Monday but held at the close. 1020 is the number on the S&P 500. These levels are the recent lows from roughly a month ago. For the Dow, the number at support is its 50-day exponential moving average still not even breached, currently at 9684. Resistance is key at 1060 S&P 500, then 1074 and finally 1101. This is a very important time for the market, as most times seem to be, in that the S&P 500 is playing with losing its 50-day exponential moving average and with financials being so prevalent in this index, it would not be good if we lost those stocks as they lead the economy and the stock market. They were the culprits of this mess and thus they need to act well, showing that things are improving, before we can feel better about this market.

A tough market to play folks. Although things have deteriorated some, and yes, things don't look great, the bears are losing momentum down here at the 50-day exponential moving averages on the S&P 500 and Dow. It makes the risk-reward weak for both sides. We want something that tells us the risk-reward is powerful in one direction. That most definitely does not exist today. We have Federal Reserve Board Chairman Bernanke's ruling on interest rates and his thoughts on the state of the economy this week, and the powerful Friday's Jobs Report. It may be another week of meandering until these events become facts to the rest of the world. The market is anxious to know about the Fed's thoughts on future interest rates. This will affect the dollar, of course, which affects the markets. It wants to know if job losses are indeed worsening. A very interesting week is dead ahead. Don't overplay this mess. Cash or almost all cash is the way.

• Harry Boxer, On 4 Charts to Watch (TheTechTrader.com)

Today I want to point out some stocks that are holding up fantastically in this market, some of them even breaking out. 

First is Anika Therapeutics, Inc. (ANIK), which had a big pop in August, backed off, and then based out for about two months. Last week it broke out, and over the last couple of days it's pulled back very gently on lower volume. Technicals holding up very well. This could be a bull flag in the making, and if it does get to 8 on any kind of volume, it looks like a - 10 1/2 stock. 

Human Genome Sciences (HGSI) had a big day Monday, as seen on the video chart (see link below). It gapped across key resistance on huge volume of 40 million shares. It did back off but still up 5.71 on the day, a key breakout to the highest level reached since 2002. This augurs well for future price progress, particularly with several firms upgrading this stock and a potential take-over there as well. 

Kongzhong Corp. (KONG), which did have a breakdown last week but snapped back sharply, gained 1.47 Monday on big volume and closed just above the moving averages. We need a follow through that takes out the 16 - 16.15 area, and then from there, potentially, this stock can recover the trend channel and move up to higher levels. 

Revlon Inc. (REV), which just has been monstrous since its recent earnings report, broke out of a key basing pattern last Thursday with a price-volume surge, and it's followed through in the last two sessions, up another 1.64 Monday to cross 10.00, the highest level in a year. (Taking into account the reverse split, of course.) Look at the long-term channel -- this is a stock that has been in literally a 10-11 year down channel, and it's at the top of that channel right now. This is a key level of resistance for it, and if it could break through here you could see a very quick, sharp move that could take us up towards 13-14 or more. 

Other stocks that are holding up well in this market discussed in our video are Apac Customer Services (APAC), Alpha Pro Tech Ltd. (APT), China Technology Development Group Corp. (CTDC), Protalix Biotherapeutic, (PLX), and Oiao Xing Mobile Communication Co., Ltd. (QXM).

• Mike Paulenoff, On a Firming Dollar, Softening Commodities (MPTrader.com) 

For a week and a half, the dollar (looking at the DXY cash dollar index) has formed a minor bottom and has climbed above its March-November resistance line, while spot gold prices have carved out a high-level trading range between 65 and 25. In other words, the rally in the dollar index has not (yet?) impacted spot gold prices negatively. My sense is that the DXY must hurdle and sustain above 77.40 to trigger upside acceleration in the dollar, at which point holding long spot gold positions could be very risky (near-term). Really what we are asking is if "this time is different"? Can gold find a reason to rally with the dollar? For a while, yes, but not for any extended period (IMHO).

Moving over to oil, nearby crude oil prices are pressing on a very important support plateau at .60/50, which if violated and sustained should trigger additional weakness as the price structure returns into its prior multi-month range. My near- and intermediate-term work point to lower oil prices (especially if the dollar continues to climb), which points to a test of the 50 DMA next, at .80 - likely on the way to .00-.50 thereafter.