June Swoon or Summer Doldrums ? plus EMG News

Sorry for the long delay between posts for anyone who actually misses my comments, it has been a busy month and not much on the news front of my stock picks til this past week. I have been watching the DOW and markets closely as it rallies higher beyond most of our expectations so this time of the year is the most important.

The number one question everyone is asking is will we correct back to 8000 on the DOW or lower, or will be range trade until the next earning season ? I am leaning to a little of both. There is enough nervousness in the markets to take profit but it may not be this week but later in the month . This is triple witching week and historically it provides a high percentage odds of 77% of being a bull market week so buckle up.

EMG (Emegeo Solutions) came out with some news on their new software platform called FusionPoint. See the company website for the full PR but I see this as the first step in many to come in this exciting tech company. Stay tuned !

Correction coming ?

It's that time again to ask the big question, is a correction imminent ? I think so, just look at the chart,it has gone ballistic the last 2 months and it is time for a breather and what better time to do that than in options expiry week which is the third Friday of the month. Will it be necessarily this week ? maybe,maybe not, but it is coming and it is inevitable but how much is the second big question.

My way of planning for this is watch the charts for any major interday highs then big down moves. This is called "Thinking Like a Hedge Fund". They have taken massive hits and they will waste no time bailing to take profits.

On the other hand there is alot of new money coming in that thinks it's the right time to get in and missed the big move up so they may absorb some of the selling but they will be just toe dipping in my opinion so beware of the big bear that this rally is most likely still part of. Some better news is out there than a month ago but when there is profit,there is selling. Keep on your toes.

DOWn Comes The Wall

It had to finally happen, the DOW blew through 8125 and was up over 200 points at one point today on positive news out of the FED that things are maybe bottoming and news/rumours they may have a deal to save Chrysler. It closed up 168 when all things washed out at 8185.

The market seems to be running on this "worst is over" mantra and all sectors seem to be reaping the benefits from banking stocks to uranium. Now the question is will 8125 act as a support and carry the market into new bear market rally mode.

My biggest caveat is that it is almost the "Sell in May and go away" time and "almost" every year it has held true. The one time I thought for sure it would hold true was the summer after the tech crash in 2002 and it turned out to be the biggest mistake I made as the tech market came off a nasty bottom and stocks like RIM were on sale for $17-20 and the promptly went up 5 times plus in the next year so I will not be taking my eye off the ball this summer. History has a habit of repeating itself and this could be one of those times.

The DOW Wall

It's been another wild week of earnings suprises and disapointments,auto bankruptcy rumours then backroom deals to try and save them. All and all the DOW cannot break through 8125 and that is what my reference to The Wall is , besides being the best album and concert of all time that I was lucky enough to experience.

The traders always seem to be transfixed on certain numbers for certain entities. For gold it's $1000, for oil it's $50 and for now the DOW has had several kicks at the 8125 can and can't tear down that wall. With all the swine flu news dominating things I am amazed it has held up as well as it has. This next week shall really tell the tale but we also have housing numbers out suggesting the rate of decline has slowed and maybe the worst is over but I don't have the sudden urge to go buy an overpriced piece of BC real estate anytime soon.

Note on Thursday, Emergeo Solutions is having a conference call for any interested. See their PR last week for the number.

Mixed Signals

Talk about mixed signals. All those sell signals have basically stalled and are flat lining while the market decides wether Apple's and American Express positive earnings outweigh Microsoft and Amazon's disapointing sales forecasts.

We have gold inching up as per our TA guy's call which showed some clear bottoming signals but still there is no outright buy signals on the XAU which usually lead the price of gold which is up about $50 off the low last week. Gold did give some buy signals today so I am thinking we may have some safe haven buying with the Pakistan situation making some nervous. We shall see if the equities follow as Barrick gave an early warning buy signal today but needs some follow through tomorrow.

Oil has switched over to the June contract which was slightly higher than the May closing at $46 and is currently in the $49 range. What is interesting is the December oil contract as of yesterday was at $60 showing the markets conviction that higher prices will come regardless of the higher stockpiles being reported.

As well the VIX is acting bipolar not sure where to go so Friday should be another coin toss on which good news counters the bad.

Sell Signals

Looks like the call of a pullback was on the money, and if IBM's earnings are any indicator I expect further sell signals on the Dow Industrial and new sell signals on the Dow Transports which to me indicate the true market direction. The "Trannies", as they are called, did not produce sell signals so as much as I am bearish for tomorrow I was suprised to see them escape while the DJI did not.

I would think we will get some follow through on upside of the XAU gold shares and the price of gold. Our TA gold guy has been calling for gold and the shares to rise since last Wednesday and it may be looking like he is bang on if we see another step up tomorrow to confirm those buy signals of the golden metal.

The big smackdown today was from the market reading into the leading indicator numbers that show the contraction in the US economy will last through the summer and up to 6 months. This is not a postive but is almost expected versus what we have seen in the daily news the last two months as more people struggle to find a job,keep their job and rein in their spending.

Oil took a major beatdown over $4 to the $46 range as predicted but much faster than I wanted to see. I am thinking it will take some serious good news to slow a sell off most of this week so expect to see some more downside movement as the froth is blown off.

Oil and the DOW

The coming week plans to bring more volatility as more earnings reports roll in. The charts seem to be telling us along with the media that we are overbought and are ripe for a pull back so be on your toes. I don't expect it to be too long a pullback as alot of shorts seemed to be getting squeezed and most will use any opportunity to get out rather than play a long correction.

The one thing I find interesting the most the last 6 months is the corelation with oil prices with the DOW as well as gold with the US dollar. It used to be if the markets went up, oil went down and vice versa but now oil seems to trade up with the DOW rises and vice versa as the market looks for optimism we will be using more oil with a rebound from this recession. My gut tells me OPEC and some others have a very strong interest to keep the price above $50. Funny how new trading trends come out of the blue like that but that's what makes the markets such a wild place to be.

Should be interesting to see how this week plays out with Chrysler and Fiat as any bad news on a big scale could knock us back quickly. Don't see oil going much lower than $45 as the long term prices on the CBOE are showing a long term bias to the upper 50's.

Play safe and don't risk big bucks at this short term top,patience is a virtue for sure at this junction.