Swing Trading Strategies & Stock Picks Since 2003

These articles describe the statistical probabilities of long positions on these equities, based on neural net projections, for the next 5-15 trading days. These are not holy grail methodologies, the road to easy street, or anything else. These projections are the result of screening for technically significant retracement and momentum patterns that have been further screened for value and bullish sector performance. In other words, the projections are for long positions.

For 07/28/2010:

                                     $INDU      $SPX         $COMPQ    $RUT

Monthly Momentum   Neg            Neg              Neg             Neg

Weekly Momentum     Pos            Pos              Pos              Pos

Daily Momentum        Pos             Pos             Pos               Pos

N means neutral, Neg means negative, Pos means positive (OS) means oversold and (OB) means overbought. The value to price estimate (it is not a guarantee, only a cash flow based estimate) can be defined loosely as a multiplier of price. A number higher than one means the stock is undervalued using this model and a number less than one means the stock is overvalued.

Index and ETF I-shares Bullish Reversals (Note: to look up quotes for the Dow Indexes (starting with DJ or DW, add a dollar sign. No dollar sign is required for the ETFs beginning with other letters.) Today’s list includes only those ETFs with a 50-day moving average of daily volume greater than 100,000 shares:

The stocks listed below are ranked by pattern bullish reversals based on a momentum indicator. Each stock by sector is listed with the cheapest stocks on a near-free-cash-flow value/price basis at the top, and more expensive stocks on that basis farther down each sector list (they are listed alphabetically):

None

Stocks that almost passed the neural net screens but just missed: None

Tuesday was a true slop-fest of relatively low volume confusion as it appears that the U.S. stock indexes move toward the resistance areas as I explained in the Sunday video. As reported by IBD, NYSE volume was actually up by 10% from the previous day, but NASDAQ volume lagged (which might explain the weakness in tech stocks yesterday). The reversals were non-existent (and with price action as listless as it was, it should be no surprise). One thing is important to note: Short resource ETFs and short resource nation stock ETFs (like Brazil for example) are showing bullish reversals. It is not impossible that we could continue to see this action as there seems to be lingering strength potentially happening to the dollar as the Euro seems to be approaching a resistance level and a double top in this last rally versus the dollar. Materials prices seem to be under assault as traders, business people, and economists wrestle with whether or not the world is entering a second dip in a double dip recession.

We are, in my opinion, at a crossroad for the dollar versus other currencies. Soon we will find out of the countertrend rally in the daily Euro charts is simply a bull-market rally in a bearish longer-term trend, or the beginnings of another rally in the Euro. I, for one, do not know the answer, but with Euro-zone sovereign debt issues still a bit shaky, we should not be surprised in EITHER direction. Such is the state of world economics. That is why I try to study the charts and the patterns and not try to predict so perfectly. Hopefully with the building of new neural net models I will have some better insight, but please, do not hold your breath during this process, unless you like wearing a blue face.

Here is what passed the neural net screens:

                                        Value/Price EST.       7 day ATR   %( 7 day ATR)/Close

Nothing today.

Note (O): optionable*

Beta greater than 1.5, Volume greater than 1 million shares on a 50-day simple moving average.

I hate to be so repetitive, but I cannot express any better what I continue to see in this market, discussed below:

The dynamics of longer term momentum are rather bearish, with monthly momentum still negative. Daily momentum is now bullish, but we need to watch weekly data. For now, it too is bullish. Monthly momentum remains negative as key resistance levels in the indexes are yet to be fully tested.

Any positions, short or long, should be limited in size to what your risk tolerance and trading capital limits allow.  Use proper money management skills to scale into and out of positions as profits occur. Low overall volume could also still be an issue as the summer ends. These are tough market conditions in which to trade. Journal mistakes you make and the conditions in which you make them and learn from them. These are times that will hone you as a better trader and investor if you do so.

One needs to stick with one’s trading strategies and not roll the dice. Manage your stops and targets well. It will help make AND save you money. We still do not know from day to day what will push this market.

Take care,

DBB