Stock Market Analysis August 29 2013

Morning Stock Market Thoughts For August 29, 2013

This is the first morning in what feels like forever that futures are pointing higher. So can the market follow through on yesterday’s tepid bounce?

To stay informed I will watch IWM closely after the opening bell to try and get a sense of direction. I usually wait and watch the 1 minute candlesticks of the SPY and IWM to see what kind of daily trading range is being established in the first 45 minutes or so. You never want to buy the morning gap up, only to see it fade, right?

One other clue to watch…

Lately the US dollar and US equities have been moving in concert, which is opposite to what is traditionally expected. For exampe: Yesterday the USD was up significantly and this seemed to buoy stocks. The media is calling it a “flight to safety” but I get the feeling that might be the headline du jour invented by the financial news media to explain the strange price action.

— The other things to be aware of this morning are the decrease in US jobless claims and US Second Quarter Growth. Again, while the numbers seem positive for an “economic recovery” you’ll want to watch how the market reacts. Any news or data that lends credibility to FED tapering could be sold. So be on watch for market logic…

Trading Thoughts On Stocks I’m Watching Today:

— SNV had a strong session yesterday and I would be pleased as punch to see it follow through today. I’ll try to avoid cheerleading too hard.

— FMD has been fun to periodically check in on, though I don’t own a meaningful amount of stock anymore. Having watched the price action, I get the feeling FMD is drifting lower until resolution of the IRS tax liabilities. The fun thing is that this stock could explode, either up or down. Are you willing to place a bet? (I’m not).

— BRKS is at attractive prices, but the technical analysis leaves something to be desired. My biggest concern is that instead of rallying higher from the current share price (as it did in April), Brooks Automation is just flopping around – threatening to roll over. While ultimately I think the stock could make it to the $19 range, it could get to $8 first. That’s why I’m building a position slowly.

— Speaking of bottoms: STLY may be carving out a bottom too. If it can remain above the $3.40 level I will see this as constructive. You’ll remember the stock sold off hard after it’s last earnings miss. Patient investors recognize the intrinsic value of the company and are willing to hold on a few more quarters to see if the company can benefit from it’s ERP updates, new showrooms and improved service staff.

— If markets are strong today, there might be a pullback in gold, and consequently IAG. I’m interested in an entry on the long side, but haven’t been able to get one to my liking, just yet.

Other Thoughts and Good Articles I’ve Read Today:

Maps of the escalating Western presence around Syria. But: No Clear Signs for US Military Action, yet.

— Something is up with Euro vs. Dollar option pricing. If these indicators are on the money… and the correlations between USD and SPY mentioned above continue… well… wouldn’t that be an interesting turn of events.

Free Video: “After Hours With The Option Addict” – Check out this great educational video to learn how the ultra-successful Option Addict banks coin.

— If you’re looking for some long weekend reading, check out my recent stock market book reviews: A Random Walk Down Wall Street (Book Review) and Confessions of a Street Addict (Book Review).

Back with more after the open!

Stock Market Day In Review: August 29, 2013

I’ll keep this short, as I was in meetings most of the afternoon. Things started out pretty well..

But that was about as good as it got. While small caps (IWM), home builders (XHB) and even technology (QQQ) held up pretty well, the mega-cap DOW names continued with their less than impressive performances. For example…

The action in XOM alone is enough to discourage you from adding risk. My positions in BRKS and SNV both also gave back early gains. I wasn’t able to add to IAG, but the end of day drawdown in gold caught my eye too.

And maybe that’s the take home message…

In the early part of the year, you’ll recall that markets often gapped down and then would rally up into the close. Today, the action feels almost opposite. The morning euphoria fades as traders and investors seemingly come to their senses and reduce risk exposure into the close. That’s not what you want to see in a bull market.

So what is a diligent stock picker to do?

I’m continuing the boring path of carefully averaging into stocks with strong fundamentals. If I can stay disciplined with my buying, there might even be chances for some swing trading scalps. But at this point, with the spectre of war, the possibility of tapering and strong performance year-to-date, I’m hard pressed to chase risk at these levels. I’ll buy conservative lots of stocks that have a margin of safety as they come down to technical resistance. And I’ll sell on any quick rips. But most of all, I’m watching and waiting.

Long patience.

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