ITZ STOCK PIX: Best July Since 1997

July 2009 closed with big wins for the bulls. The S&P 500 index is on pace for its best July since 1997. The Dow Industrials were up more than 8% for the month making it the best July since 1989. The NASDAQ composite is up over 8% for the month and up five months in a row making it the longest winning streak since August 2003. The U.S. dollar is took a big hit today, falling to its worst levels for the year, which is fueling a rally in the commodity space.

Update on some of my stock picks this month.
BUYS:
Freeport McMoran (FCX) $45 ~ $60.30 +34%
Alcoa (AA) $9.14 ~ $11.76 +28.7%
Hecla Mining (HL) $2.53 ~ $3.15 +24.5%
Yamana Gold (AUY entry $8.50 currently $9.49 +11.7%
Apple (AAPL) $141 ~ $163.39 +15.9%
Transocean (RIG) $67 ~ $79.69 +18.94%
China ETF (FXI) $37.15 ~ $41.68 +12.2%
Valero (VLO) $15.82 ~ $18.00 +13.8%
Google (GOOG) $394 ~ $443.05 +12.45%

One Sell Lifeway (LWAY) $13.74 now $13.05 -5%

These picks have been suggested over the last 4 weeks & have an average gain of 19.13%. *see disclaimer below

Weaker Dollar = Higher Gold & Commodities

Further weakening in the US Dollar, could it be heading towards it's '08 lows? If so Gold would then make another run towards the $1000 resistance level. If this economy is picking up strength [JP Morgan analyst is projecting 3% GDP for Q3], then look for a pickup in the inflation trades.
My picks have been Yamana Gold (AUY) & Freeport McMoran (FCX). For the month of July commodity prices rose by 13.8%.

*click on chart to expand image

Near Term Retracement in Markets?

Interesting CNBC interview with Emily Saunders, CEO of Sanders Financial Management said she projects an 11-percent retracement of the Dow and the S&P. “We expect [the Dow] to be back down to the 8,000 level and high 800 level on the S&P,”

“Right now, the major market indices are about halfway between the October 2007 highs and March 2009 lows and we think this is going to be a W-shaped recovery in terms of the equity markets and we are now in the top part of the middle part of the ‘W’.”

I've been noting on several charts that near term caution is warranted in equities.

*click on chart to expand image

Is the NASDAQ 100 Overbought?

The NASDAQ 100 ($NDX) is showing signs of being overbought. That said...the market can stay overbought as it stayed over sold several months ago. If the $NDX breaks out of the downtrend channel...then this rally is stronger than I believe. The easy money off the "oversold" bottom has been made, now earnings need to support prices. In the charts below it is apparent that the indicators point to overbought, especially on the percentage over moving average oscillator. Note the extreme reading in the $NDXA150R & $NDXA200R!

*click on chart to expand image

Rally Leaders

Consumer Discretionary & Basic Materials have been market leaders in this recent rally.

*click on chart to expand image

Cautious on Apple (AAPL)

As I reported last week...

"With the NASDAQ having rallied now 12 days straight... I would also suggest traders/investors exercise caution and use trailing stops or hedge with options." ...as the charts were giving a topping signal in many of the stocks I've reported on this blog.

Below I have an Apple chart, this stock has been resilient in the market...but maybe seeing some signs of exhaustion here. I would use the same cautious approach and either lock in some gains or use option hedges. Near term caution...long term bullish.

$SPX Bullish Signal

The SP500 has risen up more than 12% above its 200-day simple moving average, and looking back at when this has happened in the past, it is nearly always a bullish development longer term.

OIL, DOLLAR & THE S&P500

Crude Oil ($WTIC) took a hit today, it's resting currently on the trendline. As is the US Dollar after putting in a double-bottom, any strength here could see crude test its July lows $58. Expect further declines on equities ($SPX). I still believe that this will be a minor pullback and that the $SPX needs to see a blow off top near 1,050.

Making Money With Percentages

One of the indicators I track for both long & short term trades, is the percentage of stock trading over their respective moving averages. On the shorter term I use the 50 day moving average, here on the S&P 500 the chart is $SPXA50R. When over the 80% mark is a red flag SELL, it could be quick or stay overbought as the $SPX rises, again I use other indicators and this is not a stand alone...but a significant one albeit. Now on a longer term call, I incorporate the 150 & 200 day moving average percentage. When all 3 moving averages trend over 80...IT'S A SELL and viceversa when below 20% a BUY. Although not a focused and pinpoint timing indicator, it can be used to avoid the recent major decline of 40% in the markets...as well as a re-entry into an oversold market. If you ignored the Sell Signal in early 2007 and held a $10,000 position in the $SPX would be worth $6,760. Where as if you'd sold between $SPX 1400 & 1500 & then re-entered back around 700/800...that $10,000 would be worth $13,000! Almost double, not to mention what you could of made doing nimble trades using the $SPXA50R in the decline or if you used leveraged index ETF's or options??? My observation is that the $SPX will continue to rise and test the 1,000/1050 resistance level before correcting back towards it's moving averages. One other note, I've mentioned this in prior posts, look at the $SPX weekly chart using the 26 week EMA against the 52 week SMA...that's close to a long term BUY signal. But my technical/fundamental & sentiment indicators point to a blow off rally coming soon and then a pullback into Sept/October in the next earnings season to support stock valuations. If this recovery shows improvement...especially on the lagging jobs reports [2010] then the $SPX can possibly head towards the 1,200 area by the end of 2009.

Transocean (RIG)

Take some money off the table on Transocean (RIG), looks overbought near term.

US Dollar Near 2009 Lows

The dollar traded near the lowest level this year against the currencies of six major U.S. trading partners on speculation the global economy is shaking off the worst recession since World War II, sapping safety demand. ~read more~

ARITHMETIC VS. GEOMETRIC

What exactly is the Value Line Arithmetic Index ($VLE), and how does it differ from the Value Line Geometric Index ($XVG)? Both indexes are products of Value Line Inc., developers of the popular Value Line Investment Survey. The two indexes both consist of the approximately 1,700, equally weighted stocks that make up the investment survey. The principal difference between the two indexes, however, is the way that they are calculated. The Arithmetic Index consists of a simple mean or average in which the sum of the items is divided by the number of items. The Geometric Index, on the other hand, is a bit more complex. According to Value Line's description at www.valueline.com, the geometric average involves taking the nth root of the product of n items. If n = 4, then the geometric average of the four items would be the fourth root of the product of the four items — in other words, multiply the four items together and take the fourth root of that product.

What difference do these computation methods make on the respective indexes? Generally speaking, both Value Line indexes do a better job than the S&P 500 and Dow Industrials do at picking up the price action of smaller stocks. Because both averages are equally weighted.

One of the more particular aspects of the Arithmetic Index ($VLE) is that, based on the way the index is put together, it tends to advance farther than the Geometric Index (XVG) in a bull market and decline less in a bear market. This has led some to claim a preference for the Geometric Index, which is believed by its adherents to be a truer reflection of stock strength than its Arithmetic alternative.

*click on chart to expand image