April 17, 2013

Logical Market Update: Correction(s) Continue – Earnings Disappoint – Precious Metals Fight for Stability

The Correction(s) Continue – Earnings Disappoint – Precious Metals Still Fighting to Find Stability

The answer to Tuesday’s question(s) was resoundingly answered by Wednesday’s opening. Yes, the corrections continue in the equity, treasury, forex, and precious metals markets. No, the “all clear” signal was not issued.

I’ve read some bloggers urging traders and investors to exit and stand aside. Others are making comparisons to 2008 when the global financial collapse brought down the precious metals and mining stocks as well as most other markets with a thunderous and precipitous stampede for the exits.

I on the other hand continue advocating switching strategies if necessary and focusing on day trading and less if at all on position trading. I continue to recommend what I have found to be the best trading platform available to a broader range of traders from novice to expert. Diversified Trading System offers cost effective products that allow a trader to enter into the “chaos” and trade more effectively.

Trade Manager from Indicator Warehouse automatically calculates the correct amount of contracts or shares based on your account size or market volatility. Automated stop-loss management and position sizing eliminates most of the problems most individual traders have. Day trading and position trading both require (actually demand) good risk management. Trade Manager does the job across the board and is an essential trading tool that ensures that you take the maximum profit from all your trades.

Wednesday’s Notables

Earnings season continues with Bank of America posting worse than expected results. This not only added significant downside pressure on BAC but on the financial sector as well – despite Citigroup’s more positive results from last week.

Goldman Sachs failed to garner any follow through buying after reported much better earnings at $4.29 a share versus estimates of $3.88. Goldman’s underwriting department continues to churn out the gains at 63% year over year.

Notable Companies releasing earnings on Thursday:

AMD, AN, COF, CMG, GOOG, IBM, ISRG, MSFT, PM, UNP, UNH, VZ

Friday is April expiration and I expect volatility and momentum to increase.

Broader Indexes – What to Expect

If the correction is full force, additional upside should be held to:

DJIA – 14650 to 14665 should contain upside before the market begins to break below 14550 – there should be light support at the 14500 to 14450 area, but eventually downside momentum will prevail with stronger support coming in at 14400 to 13750.

S&P 500 – 1559 to 1565 should contain follow through upside if the market is going to break below 1543 this week. Stronger support lies below between 1525 and 1475.

Russell 2000 – continue to look for 908 to 910 to contain upside before a further break below 895 to 900 occurs. Ultimately it could get very ugly for the Russell 2000 with stronger support seemingly far below at the 850 to 820 area.

Precious Metals –

Gold continues to trade with increased volatility and although the range has decreased substantially over what was seen on Monday. The downside does not appear over yet. Look for 1400 to 1423 to contain upside before this metal puts in additional downside with a break below 1300 very likely. As previously discussed it is going to take some time before stability and a sustained reverse of direction take place.

Silver is likely to be held below 24.25 before joining gold in another leg down. I suspect that 22 will be broken with next stronger support not available until the (dare I say) 18 to 20 area.

The Diversified Trading System used together with Trade Manager should continue to produce numerous trading signals in Gold and Silver futures, GLD and SLV – gold and silver ETF’s and several mining stocks.

U.S. $/ Euro-

The US $/Euro did not disappoint on Wednesday seemingly falling off a cliff as the called for correction kicked into gear. The trading range was large at over 150 bps. A break back below 1.2974 may ultimately lead to a stronger down leg carrying the potential for a drop to the 1.2350 area.

Here is an updated list of the markets where I have found that DTS (all three birds) are producing numerous signals:

DJIA future (e-mini available)
S&P-500 future (e-mini available
US$/Euro futures (e-mini available)
GS (Goldman Sachs)
AAPL (Apple Computer)
GOOG (Google)
LNKD (LinkedIn)
NFLX (Netflix)
30-yr Treasury Bond future
10-yr Treasury Note future
TLT (Treasury Bond Long ETF)
TBT (Treasury Bond Short ETF)

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