TradeWinds for Friday February 8th

The market gave us what we needed to salvage our budding upward momentum. We held the bottom on the QQQQ and the 50% retrace on the SPY and DIA. In looking at our charts, our slow and fast momentum indicators slowed their decline significantly. Our moderate indicator continued its sharp downward path. IF the market continues to rally I expect all indicators to turn upward as we head into the weekend. The market will tells us what it wants to do, of course.

We do want to note that CSCO, which was the big negative news in the morning, actually posted a nice gain for the day and nearly made our top 25 longs list.

Tradewinds for February 5th

Yesterday saw a not surprising down day in the markets. Our mini-rally was getting overheated, so there was some therputic release of the the overbought pressure. You can see that our fast momentum graph has taken a down turn, but that our moderate and slow momentum indicators were unfazed by yesterday's action. This is healthy. The momentum indicators can go in different directions for a few days as the excess is worked off, when they all get back in unison (either up or down), then we have another good entry point.

Not surprisingly, a lot of the ETFs and stocks that I track also posted a down turn in the fast momentum and fell into the neutral category. Not a big deal, just means we sit on the sidelines for a day or too and see if the this downturn is just the "pause that refreshes" or is a reversal to a downward trend.

Overall the negative momemtum continues to burn off, but we still have strong long term winds in our face, so if you are long be cautious.

We saw a lot of the agriculture stocks move into our top 25 yesterday - POT, MOS, MON, TRA, MOO. I am also detecting a revival of the solar industry in the rise of CCC, WFR and FSLR. Biotech, BBH has made a nice move. And transports remain strong - IYT, CSX and GT.

Tradewinds for Monday February 4th

Last week we saw a continued reduction in the hurricane force winds that have been buffeting the market since the first of the year. This came much to chagrin of the doom sayers and secular bull aficionados. I can speculate why the market rose the way it did last week, but remember the mantra of "Don't Ask Why". We only care which way the wind is blowing now and for as long as we can reasonably look into the future - a few days to a couple of weeks at best. Remember when reading all those stories of doom that bad news sells papers, clicks on the Web and all sorts of advice on how to not lose your money. Well anyone that has been watching closely knows that while everyone is crying crocodile tears over the sub-prime mess and the collapse of housing, some smart people have been making a bunch of money as the financial sector and homebuilders have zoomed off their lows. I bet you a lot of those pundits of doom have been among those.

Okay, lets get on to the Tradewind forecast. The storminess has definitely begun to subside, but there are still dark clouds out there. All of the broad index still have significant headwinds, so caution is still the word. We are seeing more stocks and ETFs moving into calmer waters. Of the 80 securities that I track, 29 are either rated neutral or the favorable zone. Check out the graphs to the right. You see that moderate momentum is sky rocketing and the long term slow momentum has turned up nicely. The fast momentum gave a little head fake in the middle of the week, but is moving up nicely. Remember the first rule of momentum, a body in motion tends to stay in motion until something stops it.

The top rated stocks and ETFs, to no surprise see plenty of representation from financials and real estate. Also three of the broad market ETFs that I track, IWM (Russell 2000), MDY (Midcaps) and SPY (S&P 500) have joined the top tier list. Others in the top tier list are: XHB, RTH, IYR, XLF, IJR, SMH, CSX OI, ACAS, C. I am excited to see SMH on this list, because that just may mean that the techs are getting ready to catch fire.

My second tier of stocks and ETFs are as follows: GLW, EOI, GT DRYS, HERO, RIO, PCU, IYT, XLI EWJ, EFA, IGN XLK. I like seeing RIO and PCU on this list as it indicates a revival in the industrial metals. Once again, not something that you would expect if a big bad recession was coming.

I do not have any sell signals flashing for the securities that I track.

A note on my methodology. I use a combination of slow, moderate and fast momentum indicators. For this I use the True Strength Indicator (TSI), Fisher Transform, and Trix. There are others that you can use that would probably work just as well. The key is to look at momentum over multiple dimensions and timeframes (I look at daily and weekly momentum). I score the securities that I track and thats how I come up with these lists.

TradeWinds for January 31st

To continue with our analogy of the hurricane, the last several days has been the eye of the storm passing over the market. We saw nice reversal of the short term and long term momentum indicators. However the fast momentum indicator that I use is show that most of the ETFs and stocks have hit an exhaustion point and we will now see some downside movement. The key will be as we move into the backside of the market hurricane if we significantly reverse the momentum that we have been building up the last few trading sessions. My hunch is that we won't, but the market will tell us the truth.

There are some bright spots as we head into the next few days. Technology is one of them. Momentum is building for QQQQ, INTC, CSCO, GLW, RIMM, SMH, NVDA, XLK and they are not showing signs of near term exhaustion. They are are still facing negative long term momentum numbers, so be careful. I am also liking the Euro ETF, FXE and Utility ETF, XLU, both of which would make sense in a falling interest rate environment.

In the coming days I will be posting information about my methodology and the list of ETF and stocks that I track. Watch for that.