Mixed Market Signals This Week

The S&P500 SPY and the US Dollar ETF UUP were both up today as well as bonds being relatively flat and at support. This week’s video goes over the correlation breakdown of today and some short ideas for next week. Also, the S&P500 did close above the 2011 highs of 137.18 today but will need to close above today’s high to confirm. This will be the third time the SPY has closed above that level. The first two times were last week and they both failed. I still think a move to the 50 day moving average on the SPDR SPY is in the cards near term but we’ll find out soon enough.

I’ve got three short ideas for next week also in this week’s video which include BRCM Broadcom, CAT Caterpillar, and AA Alcoa.

Weekly Market Wrap Video Transcription:

Hey, guys. Today is Friday, March 9^th 2012.Welcome to the StockOptionAsassin.com weekly wrap video. We really got some mixed signals today with the market, the dollar, bonds, gold and just a bunch of things.

S&P500 Technical Analysis

So, first thing I want to do is take a look at the S&P. And we’re up.

We ended up closing at up about 0.39%, and really we got some of that in the last ten minutes or so. This was looking like a little bit more bearish candle, just a little bit ago. But regardless, this level we’ve been watching, I’ve been talking to our members about is the 2011 highs were 137.18, and you can see that the week before, we closed above, did not confirm, closed above, did not confirm, pulled back. Now today, we close above again. We closed at 137.57.

So in order for us to confirm a breakout above the 2011 highs, we need a close above this high, and today’s high was 137.93. So next week will be interesting to see if we actually get that close or do we get a little deeper correction. I’m kind of in the bearish camp, but I’m getting my hands slapped on some shorts, so I would still look for a move to this trend line.

You can see we have this trend line that comes up here. This actually coincides with the 50-day moving average and then you also have this little gap fill. I think we might be looking to fill, so – I’m not looking for a major crash or anything, but I wouldn’t be surprised if we see 133, 134, before we see 140.

A Look at the Dollar:

Let’s look at the dollar real quick. For our members I was talking about this trend line, and you could see we had this down trending line, and then the dollar was able to sort of pop above that, consolidated, popped up, consolidated, actually pulled back to the mean. The mean here is a 13-day exponential moving average. And then we pop back up today, so we’re really kind of closing at the high.

The dollar is right at this resistance level. If I bring in the 20, 50, 200, you can see we actually closed above the 50-day moving average, so this might actually extend the gains next week. And the fact that the dollar was up almost 1% and the market was up 0.4% really is just – That cannot be sustained, so one of these is going to be going down next week. Maybe you get one or two more days of sort of this missed correlation, but again, I’m on the bearish camp. I think the dollar put in a bottom here and the S&P will need a little bit more pullback to push higher, but we’ll see what happens next week.

TLT Bonds at Support:

Another thing I’ll point out is the TLT bonds there at support, so these may put in a little rally which might cause some early weakness next week. Pretty much all the major news is out about Greece. And also, the job numbers came in pretty decent, pretty much in line, a little bit more than expected but some analysts were expecting a little bit more because the warm weather this winter kind of spurred that growth. They thought if you had such warm weather, you’d have more jobs, and so it kind of came in line. So we’ll see how that plays out, but definitely not a bearish number that came out today. Again, TLT having some support here, and possibly we get to the top of this range. Let me bring my Average True Range Bands back in. And you can see this had been acting pretty well.

Bearish Plays for Next Week:

So, I want to go over a couple of names next week and really more on the short side, kind of get in some pullback things the last couple of weeks but for a couple potential shorts next week. If we do get the weakness.

Broadcom (BCRM)

The first one I’m looking at is Broadcom (BRCM), and you can see that Broadcom had a real tough time at this 38 and change level. So we have heavy resistance at 38. You can see that Broadcom started selling off before the market pulled back and once the market pulled back this week, it really kind of took a dive. And you can see that we’re back into this sort of down trending line.

We did have a nice one and a half percent gain today, but we’ll just have to see if we can continue up or not. If this thing does sort of roll over, I would expect slightly lower prices, possibly down, maybe the 33. There’s really – You had some support around this $34 level, so maybe retest that.

Caterpillar (CAT)

Another short I’m looking at is possibly an extension of the Caterpillar short, where Caterpillar again started rolling over before the market. We’ve sort of found support around this 105 level, here back up at the mean, and Caterpillar pretty much flat on the day, so –I’m not really sure what the catalyst is going to be for Caterpillar to get back up, but you can see that it did pretty much retreat off the 2011 highs.

This was a serious pivot here. You can see we got up there. We’ve managed to break out, but now we’re trading below this pivot, so I think your next resistance really is this 112.50. You can get above that, maybe you have a chance to retest the highs, but I would be looking for a small short in this area around the 112. Maybe if you want a leg in a little bit early around 111.50, you could, but again, make a move to the lower band or even retest the 105 level here.

Alcoa (AA)

The last one I’m going to look at in today’s video is Alcoa (AA). You can see Alcoa is already just kind of at the bottom. Looks like its kind of put in in the bottom, but this has a similar chart to Caterpillar. Where, this rolled over much sooner than the market did and it snapped back, just isn’t as much, ended up a little bit up on the day, but you can see it came right into the mean and just put in this sort of large topping tail type candle. And the likelihood is that this is going to at least retest these lows. If not, potentially go lower; maybe retest this bottom here around 8.92.

If you’re looking for a way to play the short side of Alcoa, I think the $9 puts are going for about $0.17. This will be sort of a high risk lottery ticket. But if you do get a move down to this $9 level, you’re probably going to double, maybe even more, on that trade. And again, these are going for $0.17, so high risk trade. But if the market does roll over, I think Alcoa’s going to go with it.