Stocks To Watch This Week

This week I am posting a few of the charts that I had time to look at that were of interest. One thing that is happening with the relative strength scan is that a lot of stocks are going to see their 52 week highs dropping, as a year ago the market went into a severe correction after the first major bear market rally. VIT was on of those that rallied dramatically, then began dropping in May. It's 52 week high is now somewhere around 13, but it will drop on a daily basis, until it meets current price. This has been in a monster up trend since late March, and is attracting a dramatic increase in volume. It is way extended here and I would like to see it build a real base.

AAON has been periodically onm the IBD 100 (I don't have this week's, but I will bet it's there). It is building a handle on a messy cup and handle pattern, but the price relative line doesn't look very good here, and a breakout attempt would be more likely to fail.


RGR is building an interesting pattern here, consolidating into a pennant along the 50dma. It could break out (or down) at any tme.

Earnings Schedule This Week

Here is the confirmed earnings from the two watch lists for nest week:

June 1 - ENS (time not given)
June 2 - APSG (time not given)
June 3 - SNDA (BMO), GEF (AMC)

If I have time I will go into more detail on the charts later.

Treasury Auctions

A lot of my readers are like me in one way: they understand the stock market and how it works, but the workings of the rest of the economy are a bit of a mystery. Most of the time we don't need any more than a very basic understanding of economic forces to successfully trade the stock market, but sometimes a little deeper understanding can bring us some insight into why the market does what it does. Besides, we have a natural tendency to "look under the hood" just to see how something works (when I was a kid my father had to put together several fishing reels after I took them apart to see how they worked. After the third one he made sure I didn't do it again). This past week, we had treasury autions, which affected the market, and since I had just a very basic understanding of how they worked, I "looked under the hood" thanks to Google, and found this site. It gives a wealth of information about treasury auctions, including a page on the fundamentals of how the auctions work, and a page with upcoming auctions and the results of past auctions. We have more auctions coming up this week:



I'll be keeping an eye on this during the week. This could be a very significant week in the treasury market.

Earnings Summary Week of May 23

Reporting a quarter of accelerating growth - None

Reporting a quarter of decelerating growth - DMND

Reporting a quarter of negative growth - VSNT, TSL, GHM

The relative strength spreadsheet has been updated and uploaded. The earnings spreadsheet should be done by early tomorrow morning.

Relative Strength Scans

Here are the results of this week's relative strength scan. As I mentioned last night, I was not very satisfied with the results I got last week and fine tuned my methods this week. After removing acquisitions, I had nearly 450 stocks within the top 25% of their 52 week high-low range. The first thing I did was sort them by 52 week high, and removed any that had a 52 week high less than 2 (that probably should be higher). Then I sorted them by average volume and removed any with less than 20,000 shares (that also could be higher, say to 50,000). I was still left with over 300 stocks, so I sorted them by volume/million shares in the float, and removed enough to get me down to 200 (the cutoff was somehere under 8000). I put all removals onto the second sheet of the spreadsheet, and this week will try not to ignore them.

The spreadsheet will be completed and uploaded later today. i am planning, but can't absolutely promise, to have the earnings suummary done tonight as well.

IBD 100

I would actually be surprised if this week my data and IBD's matched. Last week two of the stocks from the IBD 100 were not in either the finviz or clearstation databases (and I've forgotten which ones they were) so I tracked only 98 of the 100. I was going to double check this week, but IBD did not make it to my early Saturday pickup place. I might get it later, but IBD the paper is much less indespensible now that I have other sources of information (including IBD the website).

I have LFT as last week's big gainer. This is one you got lucky on if you were in it, as it looked about as bearish as you can get, with a break of the 50dma and several days of high volume selling. It did, however, bounce off support, and the big gap up was on earnings.

TSRA was last week's second biggest gainer, and is one strange looking chart. We have a 50% drop late last year, then immediately it began climbing back up. I don't know the reason for the recent gaps up or the increase in volume, but this is very near breaking out to a new 52 week high.

BMA was last week's biggest decliner. This was pretty well extended after a big move up, and was clearly having trouble with the 17 level, and gave a pretty clear "get out" signal when it reversed hard after it's second attempt. Friday's drop and increase in volume looks like an earnings miss, but I didn't see any news on it.


RBA was the second biggest decliner, and as has been usual lately, it probably the best looking chart of the bunch. The 50dma has held, and 22.50 looks like pretty strong support. The two days of high volume selling is my only real concern here.

Following the trend in the overall market, there were a lot of big movers on the IBD 100 last week. I don't know it for a fact, but it has been my observation that when you start seeing extreme moves in individual stocks, the market is getting ready to change directions. It will be interesting to see if that is what is happening here.

Friday New Highs

Friday's new highs, sorted by industry. I believe this is the most since I have been tracking new highs.

The high volume advancers on the relative strength list.


The high volume decliners on the same list.

I wasn't terribly happy with the way the relative strength list came out last week. Because of time constraints I can't spend a whole lot of time massaging the data, but I am going to be trying several things to best a) find those stocks which are likely break out and lead the market, and b) keep the list under 200 stocks.

May 2009 In The Rear View Mirror

Among the notable things that happened: The NYSE composite broke through the 200dma and is now butting up against the previous high. The trend since the March bottom was not sustainable, but since the end of March this has been in a solid uptrend with strong support at the trendline.

The SPX did not have quite so notable a day. volume was about on par with the rest of this week, and as usual we were going to have either a big drop or rocket shot in the last 15 minutes. Today it was a rocket shot. The descending trend line is too short to provide significant resistance, but the 200dma is descending fast. The significant thing about today was the first close above 917 in over two weeks.

940 is a key level on the weekly chart, and a break above that could take us to 1000 rather easily, and above that there is not a lot of resistance. Stochastics are pointed down but have not broken through the 80 level yet, Weekly MACD is still showing significant upward momentum. We are now near the top of the major price congestion area, but volume needs to get better to break out of it.

Tha Nasdaq has broken a significant resistance point on the weekly chart and is headed toward the 38% retracement level from the 2007 high to the March 2009 low (blue line). Above that is the 2006 summer correction low, near 2000.


The Russell 2000 is right up against the 40 week ma, weekly resistance in the 510-515 area. The Russell is the index most in doubt as to future direction, and also then most likely to determine what will happen next.

The market had every reason to move down this week, yet it did not. Even considering a holiday shortened week, we still had low volume. Everyone and his brother is waiting for the correction that will give them an opportunity to get in. They may be waiting quite a while.

One newss item that didn't get much attention today, but should have, was this little nugget. Obama wants to appoint a "cyber czar" (geez, I wish we would stop using that word) to "protect the security of our computer networks". I garauntee that this will become another power grab, for the purpose of a)taxing the internet, and b)controlling the content. The internet is rapidly becoming the last bastion of free speech, and there is nothing like "security threats" to squelch freedom. I have a better idea. Take all the damn computers that are national security sensitive and TAKE THEM OFF THE PUBLIC INTERNET. There, glad I could help.

I'll have the new highs update shortly.

AEZS

AEZS is a lightly traded biotech that has been in a steady up trend for the past 6 months. Today it got a huge volume increase and blasted higher. I have no news on this, so I don't know the reason for the increase in volume. This has a history of lapsing into another base immediately after a breakout.

STAR

STAR formed another base shortly after breaking out pof it's last one, and broke out again today, although volume could have been better. Price relative is a little weak, but CMF has been positive for a long time.

RAX

RAX IPO'd last August, traded around 12, then collapsed during the September-October crash. It reversed the trend in February, and formed it's first base in the up trend, breaking out today on a huge volume surge, for which I can find no reason. Price relative stayed high during the base, and CMF also showed accumulation.

STSI

Here is one of the failed breakouts on the day. Yesterday's move, for which I can find no reason, suckered in a lot of investors at the open, and this got an enormous gap up, which led to massive profit taking by those already in. The price relative line is extremely weak, and CMF has been showing distribution for over a month, so this failure was predictable.

Breakout Candidates

Here is a brief looks at the better looking breakouts today, although none are on really good volume.

Friday Update, End Of The Month Edition

Here is the 10 day of the TNX, the yield on the 10 year treasury. It is dropping after getting severely overbought, and is headed for a support level at 35.32. The normal relationship between the TNX and the market (yield up, market up) is getting muddled, as the normal reason yields go up (investors willing to get into riskier investments to get greater returns) has not applied. Bernanke's bluff to lower the long end of the yield curve is being called by the bond market, and this appears to be a brief pause.


The SPX should have gapped up nicely with the TNX gapping down, but it opened pretty anemically. We are still stuck in that 897-917 range, with 907 being the midpoint and acting like a magnet. Today's strength is XLE and XLB, weakness XLF and XLY. XAU is up over 3%, so watch gold stocks, 6 of them hit new highs last night and I expect more today. Relative strength in the Russell 2000, relative weakness in the Nasdaq.

There are 41 new highs so far, EGO, a gold stock, has a decent looking breakout. AEZS, a biotech, is making a big move on volume and breaking out of a nice pattern. On the earnings front, we were watching for GHM to report this morning. They did, and are down 6%

Thursday New Highs

Thursday's new highs, sorted by industry. 6 of them are gold stocks.

The high volume advancers from the relative strength list.

The high volume decliners from the same list.

GHM is scheduled to report before the open tomorrow.

Still Range Bound

Today was almost the opposite of yestreday. it looked like we were on out way to a down day, when the programs kicked in and some late buying took place. There was also a treasury auction at 1 pm, I believe for 7 year treasuries, which apparently went well, so that improved the mood. The SPX tested the gamut of intraday levels, from 887 on the low side to 907 on the high side, closing just below 907. We have a series of lower highs and higher lows, meaning we are getting price constriction. We could get a serious test of the 200dma soon, either by price rising or the average dropping. But until we get a catalyst, I suspect we are range bound.

The Nasdaq lagged today, but the trend now is outperformance, and again it stayed above the 200dma. CMF here seems to have dropped off a bit more dramatically than it has on the SPX. We are getting some distribution up here, but not to the point where the big guys are bailing out, just locking in some profits.

The Dow industrials are showing a similar price constriction pattern, but in a narrower range. They are lagging again, but still in an uptrend on price relative. It remains to be seen how relevant that is.

The Russell 2000 is hanging in, staying in the upper half of the range when it looked like they were heading for a test of the bottom. When the market tips it's hand as to which way it is going, it will probably show up here first.


There's no doubt about what the oil market thinks about "quantitative easing". There hasn't been any real change in the supply-demand dynamic, but the expected trashing of the dollar is pushing oil up. It is now through the 200dma and has a pretty clear shot at 70.

Treasury auctions are going to have an effect on the market, and since I know practically nothing about them, I will be doing some research and hopefully will have an informational post on it this weekend. If we are indeed headed for a bond market dislocation, that will change everything.

I'll have the new highs update shortly.

AU

Gold stocks were very prominent on the new highs list today. AU was the best looking breakout of the bunch, with a decent amount of volume and a nice base to break out from. Gold was one of the first industries to bottom out (in October) and has made steady gains since then. This has the familiar weak price relative we have been seeing on a lot of the breakouts in the last month or so.

CBOU

What is it with these freaking coffee stocks? DDRX and CBOU have both gone ballistic in the last couple of months, are extremely extended, and show no signs of slowing down. Today's volume was the highest in the last 6 months, and I can find no catalyst for it.

SIGA

SIGA has been prominent on the breakout lists for quite some time now, always pulling back just after the breakout, only to do it again. This has strong support at the 50dma, which is probably the best entry point here. CMF is in a longer term decline, but average daily volume is increasing. Price relative is a bit weak. I have no catalyst for today's volume.

Gold Stocks On the Move

Of the 33 new highs I have so far, 5 are gold stocks. None are moving on particularly impressive volum, but AU is a nice looking breakout.

Thursday Morning Update

Perception is everything. When treasury yields go up, it is normally a sign that investors are willing to take risk and sell bonds to buy equities. Thus, the normal relationship is yields up, stocks up. But when yields go up because investors believe bonds are risky, that's bad for the market, and that is what happened yesterday. Yields on the 10 and 30 year treasuries shot up about midday, and instead of ingniting a rally in atocks, it did the reverse. This morning the TNX dropped right until 9:30, reversed, and headed up again. The SPX, in response, gapped up at the open and prompty dropped. On the SPX 10 day chart, I left my lines in from yesterday (877, 887, 897, 907). This morning's low? 887. The big kahuna is 877, if that breaks all hell will break loose, if it holds we are still range bound. XLU and XLE are the leading sectors this morning, and XLY lagging by a mile. XLF is in the middle of the pack and will probably make another wild move in the afternoon, so watch that one. Oil and gold are both up, as the dollar slide continues.

There are 25 new highs so far, but none of the charts look terribly impressive yet. DMND, which in the recent past was prominent on the relative strength list but is now n the earnings list, reported last night and is up about 9%. CUB reported this morning and is down 1%, and MNRO is down 6%.

Wednesday New Highs

Wednesday's new highs, sorted by industry.

The high volume advancers from the relative strength list.


The high volume decliners from the same list.

Bond Market Breakdown Coming?

"Dear Mr. Ben:
We understand you wish to buy much treasuries. We have lots we would love to sell you.
Lots of love,
Peoples Republic of China"

Just about midday, the yield on the 10 year, which was already up about 2%, took off and finished up 5%. That precipitated an equity market collapse. I've said before that Bernanke's efforts to force down mortgage rates were, at best, going to fail, and at worst, cause a bond market dislocation. It appears we are getting dangerously close.

A funny thing happened on the way to the resumed rally. The SPX was holding up quite nicely this morning, right up until the bond sell off, then came the collapse. My intraday level at 897 held for about 20 minutes or so, then gave way. The good news is 877 was not challenged. The better news is the volume was relatively low.

The Nasdaq took the lead early on, and held up very well when the selling started. If this can hold the 200dma, especially as the 50dma moves closer to a crossover, that would be incredibly bullish.
The Dow industrials lagged all day and came awfully close to testing support. Of course, this will change as GM comes out of the Dow. According to Finviz's screener, there are now about 1900 or so stocks that have market caps bigger than GM.


The Russell 2000, just barely breaking the midpoint of the reange it is in. It lagges a bit in the morning, but did not sell off as hard as it's large cap brethren. That is actually a good sign.

It was just about a year ago that Bernanke was being praised everywhere (even on the front page of IBD, of all places) for "engineering a bottom". We know how that came out. Ironically enough, had he left it to the market to sort things out, this might be over by now and we would be well on the way to recovery. I recently did some reading on the depression of 1920 (i didn't even know we had one in 1920). It ended in 1921. Why? The incoming President, one Warren G. Harding (universally hated by economists) refused to intervene, and the new Federal reserve didn't do anything either. The market forces worked their magic, and the economy began to recover within a year of the start of the depression. By contrast, in 1929 we began another depression, this time with a great deal of intervention, by two Presidents, and it took two decades and a world war to get us out of it.

As usual, Wednesday's new highs update will be a bit late.

CREE

This reported earnings yesterday, and blasted out today on high volume. Normally i would not like the late selling, but there weren't many stocks today that did not sell off.