Thursday’s Recap: Rally faltered a little bit. Markets declined for only the 2nd time in 8 days. Financials lost steam and took the major averages down. It is probably a good thing. Banking sector had gone up too far, too fast. XLF has been up over 60% in less than 2 weeks. Some cool off was overdue. XLF ended the day losing about 8%.
Dow shed almost all the gains it made yesterday by losing 86 points or 1.2%, and closed at 7401. Nasdaq lost 0.52% or 7.74 points to close at 1483.5, while the S&P 500 declined by 1.3% or 10.3 points to 784.
So, technically speaking…. looks like 50 day MA is the Achilles heel for major averages to overcome.
All three indices are at technically interesting juncture. Dow is 220 points away from its 50 day MA, which it has not crossed since January 7. Dow came very close to taking out 50 DMA on February 9, but it was flatly rejected. S&P has breached 50 day MA for two consecutive days now, but could not close above it. S&P also has not closed above 50 DMA since January 6th. Current 50 DMA for S&P stands at 794, just 10 points away from today’s close.
Nasdaq has however, closed above 50 day MA for 2 consecutive days now. But, is barely above (by 22 points) the 50 DMA (1461). It would be interesting to see whether Nasdaq would be able to hold above its 50 day MA in the next couple of days.
Is Dollar Worry Over Blown? – There were renewed worries about the greenback following yesterday’s fed decision to spend another trillion dollars to bolster economy. Dollar declined against major currencies for 2 session in a row since then. Dollar lost 4% against Euro in less than 24 hours. That’s a big move. This led to a bounce in commodities and commodity related stocks in today’s trading. The CRB Commodity Index rose more than 5% (largest single-session advance by percent this year). Crude oil gained 6.5% to close at $51.25 per barrel. Gold advanced by 7.8% to close at $958.50 per ounce. Energy stocks (+1.4%) and materials stocks (+1.4%) also rose.
In my opinion, the dollar related reaction to fed decision is a little over done. US economy is still the strongest economy in the world despite all our problems. Dollar is still the dominant currency. People who are squabbling over greenback, should just look back a little. Just 6 months ago, EUR/USD pair was trading at over 1.60. Now, when it jumped from 1.30 to 1.35 or so, all hell breaks loose! Very strong dollar in the past few months had hurt US companies doing business abroad. An example is ORCL, which reported a great quarter yesterday. ORCL beat the street estimate by 2 cents. Still, ORCL numbers would have been 5 cents better if it were not for a stronger dollar. So, relax folks. A slight decline in dollar is not the end of the world as the dooms day pundits like Larry Kudlow and his friends on CNBC rant about. The dollar is already stabilizing against the Euro and Yen as I write this blog around mid night.
TaurusTrader swing portfolio had a decent day. AGU and TCK were bought and added to the portfolio. None were stopped out. Today’s gainers include – AGU, TCK, BX, MDR, CPRT, +WDCDV, BX, BMC, and WMS. Stocks – MBT, WNR, and RY shot up at the open, but lost steam later in the day ending in red, along with AMR and FCN. CPRT, RY and MBT came within just a few cents of hitting the target before retracing!!!
It was just one of those very rare days that I could not find a decent trading setup to day trade! It is better NOT to trade when there are no trades to be made with confidence!!
Picks for Friday, March 20: It is a tripple witching day for options. Expect a very choppy session and the stocks to trade in a wide range. I do not want risk picking any stock to go long at this kind of market condition. However, I do want to ‘day trade’ precisely at this kind of market condition, and exploit the market volatility .
I’ll focus on financial, energy, ag and commodity sectors for trading opportunities. Some of the specific stocks that would be following are – FAS, WFC, MS, TNA, DIG, DUG, IPI, AGU, and JOYG.
If there are questions or comments, please do post.
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Happy trading ….