Saturday, May 8, 2010

Itz Weekend Review

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WOW! I hope everyone had their seat belts on this week!
European debt crisis, 1,000 intraday market moves, , wild currency moves, commodity prices collapse, volatility surges to new one-year highs.
Itz Stock Chartz had been calling for a decline in stocks for several weeks and finally the 10% correction arrived. But now what? Is this a by the dip or sell on expectations that this may have further downside?
The stock market's slump this week reflects a widespread concern among many economists that the European debt crisis could slow the U.S. economic recovery. Few expect the problems in Greece and other European nations such as Portugal and Spain to drag the United States back into recession. But the crisis has increased the uncertainty facing U.S. business leaders.
While Greece's economy isn't that large, many major European banks hold billions of dollars of its debt. Should Greece default on or restructure its debt, which many economists expect, those banks -- still recovering from the 2008-2009 financial crisis -- may cut back lending to conserve cash.
Thursday's market meltdown in the U.S. remains a mystery. Whatever the cause concerns were raised on the high-frequency trading by computers 'The Matrix'. As Itz pointed out during the week, that no matter how good the Jobs Report would be, traders would more than likely sell on the news. The Labor Department announced that April saw 290,000 new jobs, which initially lifted stocks, but the trend was down and then the fat-finger collapse in the afternoon. The jobs created were mostly from the private sector, good news, so far the economy is looking to be on track. If you combine the jobs report with the previous week's positive data from the GDP, the PMI, retail sales, personal consumption, and consumer confidence numbers we are really starting to see some improvement.
Several Itz Target Objectives were met this week. Oil hit $78, actually the low side of the Itz $WTIC chart had $75, matter of fact the COT report chart about 2 weeks ago, had a $75 price objective. Gold, Itz had a $1200/$1225 target, the daily chart shows an Inverse Head&Shoulders pattern with a $1250 completion.
So what do you do? Is a 10% correction it? Shorter term, yes we'll see a bounce, no doubt. Will it be sold into and then head lower? thing is for certain, investor confidence has been damaged. Just as the retail investor was beginning to feel comfortable with equities...BAM! Thursday afternoons meltdown hit. The problem is there are too many uncertainties and loose ends that need to be resolved and fixed. What would be bullish? An answer to what caused the computer glitch Thursday, FinReg passing, a Goldman Sachs settlement, the ECB needs to act before the contagion spreads. The ECB should resort to its “nuclear option” of intervening directly in the markets to purchase government bonds.If these events can happen, it would ease global uncertainty and rally markets.
In this WSJ report, comments from Birinyi Associates reflect the same views as Itz Stock Chartz, hedge & buy beaten down stocks... - Bears Come Back for Wall Street's Wild Week LINK
Trades for the week: The Proshares UltraShort Crude Oil ETF (SCO) was stopped out Thursday @ $12.30, it took off that afternoon & Friday trading as high as $14.23, closing @ $13.93. Those that held entering @ $12 are looking at a 16% gain. In the Friday fat-finger Matrix Selloff, Itz suggested 2 more stocks that were on Itz Radar Watch, Walter Energy (WLT) @ $75 (or lower) & Ford (F) @ $11. These two-stocks have been sold off hard, they present an extremely attractive entry price. Granted this selling could go lower, so one may consider phasing in.

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