Supportive Forces of the Stock Market

Higher Oil and commodity prices might hurt economy in general, but now they are actually the forces that support the current stock market. Many natural resource and energy stocks are in the new high territory. It seems that the Fed does a good job to give money to investment banks, so the banks can use the money to boost the commodity prices.

Knowing where the money flows to and going with it seems a good way to make money in financial markets as well as in business in general.

USO



DBC

The Las Vaga Game Houses and Royal Caribbean Cruises

I know they are different things in many ways. But one thing seems in common, this is, they are nice places for entertainments. From the stock charts of these companies, it seems that people visit them less now.

MGM



LVS



RCL

New Lows in the DOW 30

There are 12 stocks out of Dow 30 in the 52 week new low list. They are MMM, AXP, AIG, BA, C, GE, GM, HON, JPM, PG, and UTX. Industrial, Defense, and Consumer staple stocks, such as, MMM, BA, HON, PG, and UTX, just appeared in the list last week. It seems the weakness of the stock market is getting broader.

PG



UTX

Weakness in the Defense Stocks

Three defense stocks, BA, HON and UTX, which are also DOW 30 components, break down quite heavily. BA and HON are in multiple year low.

BA

Trading Moving Markets

One of my favorite rules is trading moving markets, but it is very difficult to follow. It is counter intuitive. I have tendencies to look for breakouts from the congest areas. If a market is moving, I like to wait for it to consolidate and to enter when it breaks out again. To trade good, I just have to jump in the moving river and flow with it. Otherwise I might keep losing lots of good opportunities.

ANR



AXL

Regional Bank Brothers

Regional banks are moving lower for a while already. Today many of them move sharply lower. They look like panic sells. For those lucky short sellers of these stocks, it might be a good time to cash in some profits.

FITB



RF

More sectors are in new low territory

While resource and energy stocks dominate the new high list, sectors of stocks that are in new low are growing. Here are a few of them: Bank, Automobile, Tire & Rubber, Food, Department store, Hotel, Entertainment, Newspaper, Big Drug Company, Airlines.

CTB



PBG

A Nice Poem I like very much

If I Had my Child to Raise Over Again

If I had my child to raise over again

I'd build self-esteem first and the house later

I'd finger paint more and point the finger less

I would do less correcting and more connecting

I'd take my eyes off my watch and watch with my eyes

I would care to know less and know to care more

I'd take more hikes and fly more kites

I'd stop playing serious and seriously play

I would run through more fields and gaze at more stars

I'd do more hugging and less tugging

I'd see the oak tree in the acorn more often

I would be firm less ofter and affirm much more

I'd model less about the love of power

And More about the power of love.

-Diane Loomans

Dow Jones Leaders and Laggards

Wal-Mart (WMT) is the leader among Dow Jones Compoments.



There are five laggards, American International Group (AIG), General Electric (GE), General Motors (GM), Merck (MRK), and Pfizer (PFE).

AIG



GE



GM



MRK



PFE

Hot Coal

Coal, as a traditional energy source, gains more attention than before. As a consequence, coal stocks keep flying higher and look quite hot.

JRCC



PCX



In trading, one of principles is buying the strongest and shorting the weakest. It becomes more and more obvious to me, though I still can not consistently follow it. If it happens that you can get in a position of which instrument has a strong trend, you keep ride it until its end. You never know how high or low it can go.

Grains and Fertilizers

Grains break out their consolidation areas and move higher. Both Corn and Soybean Oil are at all time high now.

Corn



Soybean Oil



Fertilizer makers seem benefiting from this "Grain Boom". Many of them are also at all time high.

MOS



It seems that commodity booms tie together with industry booms, like Oil with energy industry, Grain with agriculture industry.

Shanghai Stock Exchange Composite Index

Shanghai Stock Exchange Composite Index closes 50 percent off its all time high. It starts to test 3000 mark. The 2600 - 3000 zone might become a major playground.

Banks Oh, Banks!

While resource and energy stocks make new high day in and day out, bank stocks keep going down. Look at charts of some big banks, I wonder what are happening with them.

Bank of America



Barclays

The Attentional Move of Crude Oil

Crude Oil has the largest price move in its history. The July contract jumps about eight percent and closes at 138.55. Trading volume is also highest in recnet years.



For those lucky ones who still ride the Oil trend might be a good time to take some profits now. The volatility might kick in soon.

New High Themes

Resource and Energy stocks dominate the new high pool for quite a while. Periodically Rail Transportation and Technology stocks show up in the pool.

Recently many small cap stocks fly higher. Their moves are magnificent and volatile. This might explain how Russell 2000 outperforms S&P and Dow recent days. This kind of conditions might not be good for the general market.

ROYL



NCOC

Quote of The Day

"Trade what you see not what you think."

-Anonymous

Quote of The Day

"My biggest hits have always come after I have had a great period and I started to think that I knew something."

-Paul Tudor Jones

New Low Themes

Some financial stocks keep making new low day after day, such as DSL, FITB, RF, MCGC, so on. Recently I see some big names appear in this list, like Barclays, Deutsche Bank AG, Wachovia and Washington Mutual.

BCS



Today I see some new lows from two sectors, Bottlers and Commodity exchanges. They are all big names, Pepsi Bottling Group, Coca-cola Bottling Co., CME Group Inc.

CME

Helicopter Money

Wow, it is amazing that money can drop into Depository Institutions so easily at this large scale within such a short time frame.



The situations maybe unusual critical.

A Black Swan Chart Pattern

Traders like to find the chart patterns they want to confirm their opinions. Here is one called "Black Swan" from Elite Trader. The emotional definition of this pattern is "very, very dangerous".



By the way, Black Swan is the tilte of a book by Nassim Nicholas Taleb. I am current reading this book and I like it.

Oil on the Magazine Covers

High oil price becomes a popular daily topic. Emotions are higher on debates whether the speculation is the main force that drives the Oil price up. The current issues of Economist and Businessweek magazines make Oil as their cover stories.

     

Does Oil is too hot and ready to cool down?