Momentum-Trader Report: 03/02/08

The market sold off on heavy volume on Friday as economic news continues to get worse. Last week, I expected the market to break out hard one way or another. It broke out both ways. Take a look at this chart of SPY:

The SPY broke out of a symmetrical triangle on Tuesday. It was not the big breakout I expected, and it was quickly rejected at the 50 MA. On Friday, the breakout reversed and SPY closed below the triangle. This is not good news for SPY or the market in general, as the other major indexes all look very similar. From here, it would seem that the market will go lower and perhaps test the January lows.

I entered SDS on Friday, the ProFunds ETF which corresponds to twice the inverse of the S&P 500. As SPY broke down, SDS broke out of its own triangle. There is some overhead resistance at the 65 area. If SDS breaks this line, it could be another buy point if you want to get short this market.

Some of the other inverse ETF’s look good here as well, such as QID, which corresponds to twice the inverse of the NASDAQ composite, which could be bought when it breaks the upper blue lines marking levels of resistance.

DXD corresponds to twice the inverse of the Dow. It has found support and could be bought when it breaks 58, or again when it breaks 60.

I have been very aggressive with taking profits and moving my stops in this market. The only other holding I have right now is GLD, which did well on Friday.

I will be raising my stop to the 94 area.

All metals seem to be on a parabolic rise, but they could go even higher in this market. Here is a look at the leading sectors and groups over the last 3 months:

Leading Sectors over Last Three Months:
Basic Materials,Energy,Transportation, Consumer/Non-Cyclical, Capital Goods, Services

Leading Groups over Last Three Months:
Non-Metallic Mining, Coal, Gold & Silver, Chemical Manufacturing, Oil & Gas Operations, Railroads, Crops, Iron & Steel, Tires, Metal Mining

Trade Ideas for 03/03/08:

In addition to QID and DXD above, I will be watching these stocks. I will be keeping stops tight to minimize losses and take partial, if not total profits quickly:

Note: Don’t use this commentary to make your trading decisions. Use your own due diligence. These stock picks are posted for educational purposes

AKS is a metal stock which could offer another buy point as it breaks the upper blue line on heavy volume.

CPHD was a previous buy selection thathas turned bearish. It broke the lower trend line and 50 MA on Thursday. Friday would have been time to short it. If it rallies back toward the 50 MA, it could be a short setup.

DNR is showing a bull flag, and could be a buy as it breaks the 33 area.

POT looks good when it breaks out of the symmetrical triangle on heavy volume.

WMB is showing a bull flag, and could be a buy as it breaks the upper blue line on heavy volume.

Good luck and good trading!