Technical Picture - Markets Mixed

Markets were mixed on Friday with tech outperforming the broader markets on the heels of GOOG earnings Thursday night. Several factors weighted on the S&P and the DOW including continued weakness in banks/financials over forclosure issues, bounce in the $USD, weak earnings from bellwether GE, and unfavorable Mich. sentiment data.

As we can see from the 5 day performance chart below, money is flowing out of financials into tech.

The banking/financial sectors are really ugly. If they don't find support soon, it'll kill the rally.

Diverging markets Comp. vs. S&P and DOW is a yellow light and could lead to short-term corrective price action.

Companies reporting earnings this week:

Monday: C, HAL, PETS, AAPL, IBM, STLD, VMW, and ZION.
Tuesday: AEP, BAC, KO, EMC, GS, HOG, ITW, JNJ, LMT, OXY, BTU, SVU, WFT, CREE, ISRG, JNPR, SYK, WDC, and YHOO.
Wednesday: ABT, MO, BA, DAL, GENZ, MS, LCC, USB, WFC, AMR, ETFC, EBAY, NFLX, SCHN, and STX.
Thursday: ALXN, T, BBT, CAT, DHR, LLY, FCX, GR, HSY, JBLU, NTRS, NUE, PENN, PM, PCP, LUV, TRV, UPS, UAL, AMZN, BUCY, COF, CMG, SNDK, and SYNA.
Friday: EXC, HON, KEY, ERIC, SLB, TROW, and VZ.

Focus list for next week includes Thursday's setups for CREE, ALTR, and WYNN still in play. Also, add FSLR and ADBE at the blue lines on the charts below.

ADBE formed a base at these levels in August and could easily retest $30.00 on the MSFT rumor.

Let's review Friday's trades. We said that AMZN would likely break the $157.00 base in sympathy with GOOG earnings. And we also said it would likely gap up.

That's exactly how it played out. Opening gap, followed by a retest of the base. We wait for price to come back into the BB and form a tradable base. I exited after 3 consecutive WRBs.

Price consolidated the early move and there was no evidence that AMZN would retrace so I started looking for a potential second entry. Price formed a flat base. Two pivots into the same price levels is a tradable base. Price rallied and then retested the base before the final sprint into the close.

AAPL had an early run similar to AMZN but I missed it. In the afternoon, I noticed it was coiling near session highs. I took a long entry. Here again, price retested the base before ripping into the close.

Biotechs Poised to Breakout

IBB, the NASDAQ biotech ETF looks poised to breakout of a multi-year base at around $90.00.

The top 10 holding of the IBB account for 46%, the balance is spread over the remaining 118 names.

Here are a few biotech names I like over the short-term:

AMGN, the top holding of the IBB had very bullish action on Friday, and looks poised to BO of its $57.00 base in the coming days. AMGN is scheduled to report earnings on Oct. 21 AH (after hours). I don't recommend holding into earnings unless you have protective option strategy.

BIIB - base around $58.00 looks good. Earnings Oct. 26 PM (pre-market).

CELG, the third largest holding in the IBB, has a very nice handle forming as price contracts at the $59.00 level. CELG is scheduled to report earnings on Oct. 28 PM.

MYGN has already broken out of its base. I'm looking for a shallow pullback to gap support/fill, as a springboard to higher prices. MYGN is scheduled to report earnings on Nov. 2 AH.

TEVA, the second largest holding in the IBB, looks good at $55.00. This setup is an inverse H&S bottom. TEVA reports earnings on Nov 2 PM.

ONXX is setting up at $28.00. ONXX reports earnings on Nov 3 AH.

CEPH is setting up at around $64.00-$64.50. CEPH reports earnings Oct. 28 AH.

Technical Picture - Minor Losses

Minor corrective action on weaker than expected economic data and confusion over foreclosure processes, as depicted on the intraday SPY and QQQQ charts above and below. The SPY retraced 62% of the last leg up and the Q's retraced 38% before bouncing into the close.

After hours, GOOG's big earnings beat ( +$0.96 above consensus) have NQ Emini futures trading slightly above daily resistance. GOOG is up close to $50.00 from its daily closing price.

Tomorrow is OPEX so expect more volatility for option-able stocks. Also, keep an eye on the economic calendar.

Today's Day- Trades:

FSLR was testing its trendline after retracing 50% of the last leg up. It had carved out two NRBs ready to expand. The pre-market price action setup a tradable entry point at $140.00. The targets based on the daily were 20 MA and resistance at the blue line. The trade was executed as depicted below.

CREE had relative strength yesterday in the wake of disappointing earnings by INTC, so it was worth a second look. As you can see from the daily chart below, it was a good candidate for a target trade to the base of resistance at $57.00. I'd like to see it consolidate at this level before breaking out. The next target is a move into bearish gap resistance.

Price penetrated the PDH on the OR and consolidated setting up an easy long.

STI was from the Trade-Ideas scanner and setup a bear flag short on banking sector weakness.

Going forward, I like the following charts:

ALTR has held support of BO point and is testing the trendline. Long above blue line.

WYNN is holding support of $100.00 as it flags. Could be a big move.

AMZN has been basing $157.00 for several sessions and will likely move higher in the aftermath of GOOG's big earnings beat. Hopefully it won't gap too much.

P.S. To Trader-X fans, he's back!

Technical Picture - Trend Day

The markets rallied on a weak $USD, continued enthusiasm over the prospect of QE2 and strong earnings from CSX which propelled transports higher. Gold was the big winner on the weak dollar. Investors were less thrilled by earnings from JPM and bellwether INTC. In fact, INTC earnings were sold aggressively. Smart money took the gap up as a shorting opp and drove prices lower on a high volume spike as depicted on chart down below.

The S&P is testing resistance set by the wide topping range from back in April. Open interest is getting a little too bullish, so expect some consolidation/corrective price action soon. Meanwhile, the Q's penetrated recovery highs, and closed at recovery closing highs ($50.52) set back in April. This is where the rubber meets the road. At these lofty prices, meeting consensus earnings won't be enough to propel prices much higher. We need to see big earnings beats ie. whisper numbers for high flying tech names. As the old saying goes "money talks and bullshit walks".

After hours, APOL earnings and negative outlook crushed the stock and several of its peers COCO, CECO, DV, ESI, ...

Technical Picture - Consolidation

The QQQQ's are the only major ETF (DIA, SPY, QQQQ) which have yet to close above the Sept. 30th highs. I know that the Comp has, and it is obviously more important than the ETF, but the fact remains that the Qs have not confirmed a breakout at this late date, which leaves us vulnerable to some corrective price action.

Tech malaise is obvious from the price action of many leading stocks especially in the cloud space. Many of these names are very weak and close to breaking supports. Ags are going into a bubble as crop prices move to limit highs. The corn chart below looks to be developing a H&S top.

That's all I want to say ahead of the FOMC tomorrow.

NQ Emini futures trade into the close. The first clue was the lower high after the trendline breach.

Notice how futures have moved lower AH.

The trade of the day was HCPG pick. I was wary of long setups today, so I waited. The NRIB NR7 setup was too good to pass on. Low risk of about $0.50 generated a reward close to 9 times. Sweet!

CRM - early weakness finally paused allowing for a decent entry. The target was the base it formed after capitulating last week. Took a second entry off of a NRIB but I bailed on the first sign of a reversal.

Day Trade Analysis - AGCO, MOS, CAT, JOYG

Agribusiness names gapped up on the release of the USDA's bullish crop report. AGCO (agri farm equipment) had a bullish wide opening range. Price consolidated the gap through time in the upper portion of the OR at the base of the weekly pivot R2. The NRIB was the trigger. Place stop a few pennies below outside bar.

Wait for price to trade within the BB (Bolinger Band Std. dev. 2) to avoid lengthy consolidations, or worse, sling shots back to the retracement zone. Took a partial at 50% FE. Exit balance when price stalls at the whole $ level.

At the EOD, AGCO looks like a failed BO (shooting star). Expect price to retrace to gap support and possibly gap fill.

MOS - another Ag, breaks out of gap flag just below the weekly R2 and stalls, forms a handle and then goes on to extend to the measured move target.

CAT - Daily BO at $80.00. Been stalking this one a while.

JOYG was a HCPG newsletter pick at the daily spot (blue line). Here again the BB keeps us from entering until the initial breach has consolidated and JOYG is ripe to move higher. Took a partial at weekly R2.

Technical Picture - Modest Gains on Disappointing Jobs Data

Markets rallied to end the week despite weak jobs data. Participants were somewhat relived that the brunt of job losses were mainly due to gov't layoffs and that the weakness could engender further quantitative easing. That speculation added further weakness to the $USD, thus fueling a rally in stocks and the DOW was finally able to close above 11,000, a level not seen since five months. The weak dollar helped stoke the CRB index up 2.7%. Leadership was provided by the GKX + 6.3% (agribusiness) on the heals of a bullish USDA crop report, and the GYX (industrial metals) + 3.0%. Volume overall, was generally lackluster, implying that many investors are sidelined, awaiting real proof in terms of earnings, which get underway next week.

Companies scheduled to report earnings next week include:

Tuesday: FAST, ADTN, CSX, EXFO, INTC, and LLTC
Wednesday: ASML, HST, IGTE, JPM, APOL, and SPTN
Thursday: CBSH, FCS, LSTR, MTOX, PGR, SWY, GWW, AMD, GOOG, and JBHT
Friday: FHN, GCI, GE, GPC, INFY, KNL MAT, and WBS

The economic calendar is also full Thursday and Friday. Monday is Columbus Day (Canadian Thanksgiving) so expect light volume. FOMC minutes on Tuesday.

I'm assuming that prices can continue to drift higher short-term on continued dollar weakness. Next significant level of resistance on the SPY is $117.50-$118.00. However, the dollar could stage a relief rally anytime as it approaches support.

P.S. CBS 60 Minutes - Steve Kroft is doing a feature on HFT (high frequency trading) tonight.