Here are the technical facts for the S&P. This week we closed below both the 2002 and 2008 lows which is very concerning for the health of our markets. After looking back to a long term chart of the S&P going back to the 1920’s, the double top pattern that we just completely broke suggest that our new target - again long term - for the S&P is somewhere around 360. I know it sounds scaring but here are some hopeful thoughts.

 

First, I don’t think we are going to go straight down to that level anytime soon. If anything, we should technically see a slow forming rally sometime in the near future. This will of course present the most amazing shorting opportunity that ever existed for us traders - ever! Mark my words, after we get back into prime shorting area - my target is around 1,100 on the S&P - the people who go short are going to make millions and millions of dollars! Of course this is not only me opinion, but the opinions of some very respectable money mangers and other professional traders.

 

As you can see in the long term chart of the S&P below, we have significantly broken the 200-Month moving average and have successfully broken the neckline of the double top formation.

 

 

As for the current market direction, I think that the close near the lows on Friday show significant weakness in the markets. Until we see some sort of buying from the bullz we are going to slowly bleed away into lower levels. Regardless, there are stocks that are great looking shorts and there are also those that are amazing longs. As members know, I made major changes and additions to my portfolio on Friday! I continue to stay hedged for both directions, but let me be as up-front as possible - we are positioned to make baskets of money over the next couple of weeks regardless of where the direction in the market.

 

Tomorrow I will be sending out another Member’s Only trading video to re-cap my portfolio this weekend! I urge everyone to take a look at all their positions closely this weekend and really re-evaluate your risk profile for each trade. These are the times when a little bit of analysis and homework will save or make you thousands of dollars.

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Last month, Q4 2008 GDP was expected to show a 3.8% annualized drop. Economists were expecting the actual number to be –5.4%. But GDP came in worse than that this morning. The U.S. economy shrunk at a 6.2% annualized rate between October and December, 2008. That’s the worst performance in 25 years.

Stocks fell sharply on the opening, partly in response to the news. But should it be that big of a surprise?

After all, we’ve known that the fourth quarter was bad – that’s why the S&P 500 is trading at 1997 levels. Is there any reason to have been hopeful that maybe it wasn’t so bad?

Don’t be surprised if buyers step in during today’s decline.

Small-cap Recap

Stocks continued lower at midday on Friday on the GDP report and the news that Citigroup would turn almost a third of itself over to the U.S. government.

At 11:26 am ET, the Russell 2000 (NYSE:IWM) was down 1.41, or 0.36%, or 391.54. Advancers and decliners on the small-cap index were evenly split. The Dow was down 1.17% to 7,098.13 and the S&P 500 was down 1.6% to 740.81.

Citigroup (NYSE:C) reported it has reached a deal that will give the U.S. government up to a 36% stake in the embattled bank. The government already has an 8% stake in the financial firm. Citigroup also reported an accounting charge of about $9.6 billion due to deterioration in the financial markets and lowered forecasts, adding more strife to concerns over the bank’s present status. Citi said it would reshuffle its board, among other changes.

Continuing in the bank vein this morning, federal regulators announced today that will raise fees paid by U.S. financial firms and imposed an emergency premium on the roughly 8,500 FDIC-insured banks in order to collect $27 billion this . . .

Thought we were going to get a sustained rally today when we opened up nearly 120 points higher on the DOW. I guess that was just another brief test of intra-day resistance levels where the bullz again failed to come through strong. Still, I wasn’t that worried considering my shorts did great - again - and members and I had a long position that was up over 30% today even when the markets fell. I guess that just goes to show you that technical analysis is by far the best and most profitable way to trade and invest - period. I cannot even list the number of analyst who put buy ratings on companies that are off 60-80% in the last 6 months - there are just too many! So, I’ll stick to my charts while others read over 10-K’s and watch their portfolio’s dwindle by the day. In the trading video tonight I went over a bunch of new trading ideas, so check it out now. Happy Trading!

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Here’s what’s going in stocks:

Stocks were higher at midday Thursday as the Obama administration increased efforts to aid browbeaten banks in the weary financial sector.

At 11:51 am ET, the Russell 2000 (NYSE:IWM) is up 1.96, or 0.49%, to 403.40, while the Dow is up 0.78% to 7,327.68 and the S&P 500 is up 0.55% to 770.67.

Though Congress has already set aside $700 billion for embattled banks, President Obama has now proposed a $3.55 trillion budget that will allot $750 billion more to struggling financial firms. The plan, which is being sent to Congress today for approval, predicts that the U.S. government’s 2009 deficit will be $1.75 trillion.

Earlier today, investors analyzed tepid news out on the data front. This morning the Commerce Department released a consumer report that showed orders for big-ticket goods plunged by a larger-than-expected 5.2% in January as global economic troubles continue to cut into demand from U.S. and global customers. The report showed that orders have fallen for six straight months, and that orders for autos, metal products, machinery, computers and electrical equipment and household appliances predominantly posted declines.

The Commerce Department also released new-home sales numbers, which fell to a record low pace — 10.2% — in January to 309,000. This is the worst number on record since 1963. Prior to the release, the all-time low had been set in September 1981.

In other data out this morning, the Labor Department said continuing jobless claims hit a new record in the second week of February, increasing 114,000 to 5.113 million, over the forecast for 5 million.

SXC Health Systems

While Bernanke’s testimony before Congress on Monday was far more significant than any specifics Obama mentioned Wednesday night, neither event seems to be affecting stocks much. Except for HMO stocks. They’ve been killed this week as Obama makes a push for healthcare reform.

Medical insurers could be hurt by healthcare reform, though I doubt anyone feels particularly bad for these companies. I do think, though, that regardless of potential reform, there’s still some phenomenal upside for certain healthcare and biotech stocks.

My current favorite is SXC Health Systems (Nasdaq:SXCI). This small cap helps process prescription transactions. And its technology was involved in nearly 25% of the 3.5 billion prescriptions processed last year. Obama’s push to digitize . . .

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Just as I was expecting, a slight pull back in the markets today. It even looked like a down right sell-off earlier this morning, but the bullz found some solid ground again and came back near the end of the day. I did want to mention that on the daily chart we formed another high wave doji pattern - small real body with longer upper and lower shadows - which just signals more indecision, but at least we didn’t have the 2% drop right? As for the hedged portfolio of mine, today was rock solid with very respectable gains all around which is exactly what I’m looking for in a volatile market like this.

 

I have to say that the chart of GE looked very interesting today. The spike in volume coupled with how oversold it is makes me think this could easily rally back to the resistance line drawn around $12.00 and complete a clean retracement. Still, I just cannot find it in myself to take a long position yet in it. Maybe tomorrow will be different, but right now these doji patterns have me on the sidelines.

 

 

On a FOREX note, the GBP/USD is looking pretty weak as it moves into contact with it’s 50-day moving average. We also got a very clean bearish engulfing pattern today following some longer upper shadows the last couple of days. I think this pair could be back down to 1.35 in the blink of an eye.

 

 

I have a religious obligation tonight that will keep me away until later this evening. I will however be back at sometime with a new Trading Video, so check back frequently. Happy Trading!

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In a minute, we’ll get to President Obama’s speech from Tuesday night. First, a small-cap recap…

Stocks slid sharply during midday trading Wednesday on weak housing data released this morning and on further stress in the financial sector as investors remain doubtful about the U.S. government’s bank plans.

The Russell 2000 (NYSE:IWM) was down 15.26, or 3.7%, to 397.22 in early afternoon trading. Small-cap decliners were leading advancers by nearly 11 to one. Meanwhile, the Dow fell 1.83% to 7,216.17, and the S&P 500 was down 1.82% to 759.07.

The Obama administration has begun making the 20 largest U.S. banks — including Bank of America (NYSE:BAC) and Citigroup (NYSE:C) — undergo "stress tests" today to see if any can weather further recessionary pressure. If any banks fail the test, the government will require them to raise capital from private sources. If this isn’t possible, the banks will be required to swap out the government’s existing, non-voting preferred shares and replace them with new preferred shares that are convertible to common stock with voting rights...

Good Morning! After watching the speech last night by our new President Obama, I found myself getting tons of emails from people suggesting that the markets are going to sell off again today - as they usually do when Obama speaks. FranklyI don’t see us erasing all of our gains from yesterday, but as I mentioned on the Trading Video last night, we could see a slight pull back from normal profit taking. As the futures suggest, this is exactly what might happen today. I am still looking for the markets to rally near 825 on the S&P before I get out of my long positions and ride the next short wave down. Below are today’s intra-day support and resistance levels for the S&P. If we make it up to the first resistance level at 787 I’ll place a very small bet for a one day reversal. Now, if we get anywhere near my 809 level you can be sure I will be exiting my longs and going short. That type of two day move is very unsustainable and would almost certainly warrant a reversal.

 

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Talk about a turn around in the markets today. Yesterday down nearly 3.5% and today up nearly 4%. I don’t want to say I saw this coming, but I have said that the market was over-sold. As for my portfolio, today was down right amazing! First, DPZ (Dominos) opened down and hard this morning on earnings news. After moving down nearly 26% today alone, members and I took profits below $4.80 on this short at nearly the exact low of the day. Of course I will go over this tonight in the Trading Video, but I had to mention it here. As for our other shorts, one was down nearly 15% today when the markets were rallying. Talk about a great day of trading. Our general trading strategy over the last few months has been working out great and will continue to but more money in member’s pockets - if you are a member of course. See you tonight for the Trading Video.

 

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Stocks are in rally mode this morning despite consumer confidence plummeting to a new low this month.

At 10:51 am ET, the Russell 2000 (NYSE:IWM) is up 8.69, or 2.2%, to 403.27, while the Dow is up 1.63% and the S&P 500 has risen 1.9%.

Fed Chairman Ben Bernanke is currently speaking to Congress about U.S. monetary policy, and has pledged to use all available tools to lift the country out of the recession that began in December 2007. In his testimony, Bernanke said the U.S. economy will probably keep shrinking in the first six months of the 2009, but is hopeful that the recession will end this year. He warned that there were still risks to his forecast.

Earlier this morning consumer confidence data was released, and the numbers were dismal. The Consumer Confidence Index plunged more than 12 points in February to 25, from 37.4 last month, and far below the predicted 35.5 level.

Back in Time

Seems like every day we dial the clock back another year or two. Friday, stocks closed at levels not seen since 2000. Yesterday, it was 1997. By the end of the week, we might be in yet another different decade.

But I doubt it.

I think there’s little question that if you’re buying quality stocks at these levels, you will be rewarded.

And if you’re interested in taking on a little extra risk for the chance at some outsized gains, you might consider LEAPS. LEAPS stands for Long-term Equity Anticipation Securities. They’re options that are good for up to three years out. With the markets trading at such low levels, LEAPS could pay off handsomely.

Just be careful of the volatility premium of any LEAPS you might consider. Volatility is extremely high right now, and you don’t want to lose too much value to falling volatility as the market eventually rallies.

On Wednesday I’ll share with you my interview with LEAPS advisor Bryan . . .

Stocks are expected to open slightly higher this morning on new consumer sentiment data and testimony from Fed Chairman Ben Bernanke on monetary policy.

Also on the docket for today is a speech by President Obama to Congress at 9 pm ET, where he will say that more needs to be done to resuscitate the economy.

Consumer sentiment data is expected to come in at 35.5 for February, down from 37.7 in January. If the numbers are in line with predictions, this would show that Americans are growing more pessimistic about unemployment, spiraling home prices and depleted retirement accounts.

Today's slight pre-market uptick comes on the heels of a steep slide on Monday, when stocks across the board plummeted on lack of investor confidence. Both the Dow and S&P 500 closed at levels seen in 1997, and the Russell 2000 (NYSE:IWM) closed down a whopping 4%.

News out Monday that the Treasury Department would start a new, revamped bank bailout program that would include the option of allowing the government to increase its ownership in financial institutions sent the markets tumbling.

Although the Obama administration doused rumors last week of a potential plan to nationalize banks, the Treasury said Monday that beginning on Wednesday, the 20 largest U.S. banks will be required to undergo a new “stress test.” The government test will determine whether each institution has enough capital to survive any . . .