Stock Market Re-Cap and Monday Daytrades

The U.S. stock market closed out the week with the Dow making new Bear Market lows and the S&P 500 sitting less than 2% above its March lows. The Nasdaq and ND 100 have performed much better, and actually finished Friday’s trading in unchanged territory. Some are calling this a key reversal, particularly since volume was heavy on Friday. However, the trading range on the day was a bit narrow in my opinion for this to be any type of significant bottom. We may get a decent bounce from here, but the trend is still down.

The market suffered from a confluence of events this past week. Currency markets are now waiting for the Fed to indicate it is ready to raise interest rates to stave off further inflation worries in the U.S. The European Central Bank indicates it may be ready to do so, and this is pressuring the Dollar. That in turn has allowed Crude Oil prices to continue upward.

On top of all this is continued weakness in the financial sector and in the auto industry. Furthermore, a couple technology giants, Oracle and Research in Motion, gave weak guidance toward the later half of the year. As a result, the Nasdaq finally joined the Dow in the onslaught that occurred this week. Still, it is well above its March lows due to strong rallies in RIMM, AAPL and other tech stocks since the March lows. However, these appear to have rolled over.

One other ominous note is the continued relatively low readings in the VIX. The VIX is a sentiment indicator involving options trading, and high readings tend to coincide with bottoms in the market. The VIX closed at about 23 on Friday, which is well below the March highs in this indicator that coincided with the March lows in the market. This suggests that there is no panic selling in the market just yet, which is what we will need to put in a bottom.

Potential day trading candidates for the long side on Monday include JRCC, CLF, CLR, HP, STLD, SQM, X, and CHK.

Potential day trading candidates from the short side on Monday include SID, DRYS and EXM.

Good Trading!

Scott Cole
www.bestdaytradingstocks.com
www.kungfutrader.com