Tze: 4:27 PM
Be safe from the hurricane for those who live on its path this weekend. We hope more people will participate in our daily discussions. Cheers. 
Tze and Roller Coaster: 1:00 AM
The stock model is updated to reflect today’s market move. You can download the entire model Excel output file here: StockModelFile_20110826 Remember we do welcome individual stock and ETF commentary requests. All you have to do is submit your request or questions in the comments section of this post and we will promptly reply.
For 08/26/2011 trading day, we are going to focus a long position in EBAY (EBAY Inc.) and a short position MRK (Merck) in Charts are provided by contributor Roller Coaster.
Ebay (EBAY) is sound in its valuation metrics (quintile ranking: 2 (1-best, 5-worst)) and its contrarain indicator in the model is very high indicating a highly probable relief rally at the very least. The RSI and MACD histogram are showing some divergence when the stock tested the support level; EBAY can possibly now bounce for a short-term trade.
MRK (Merck)’s valuation is too expensive relative to its earnings growth according to the model (Quintile ranking 5 (1-best, 5-worst)). It showed a lot of weakness when it declined rapidly to the August low. It may pull back now because it’s near minor resistance from the recent peak.
ETF Model Update:
You can download the entire ETF model Excel output file here: LeveredETFModelOutFile_20110826
Because of the huge rallies we have had from Monday to Wednesday, many bull ETFs reversed course in sentiment and right now the model is mixing bull and bear ETFs in the new buy and hold categories. We can see there is bearishness in the energy sector as well as the overall market indices such as SPX, DOW and Russell based indices still remain weak. Gold and silver also remain uncertain. Today, we are highlighting ERY (Direxion Energy Bear 3x) and FXP (Proshares Ultrashort FTSE/Xinhua China).
ERY has made a long base, and recently broke out of the trading range. This pullback can lead to higher highs.
FXP recently made a bullish move. It’s now seems to be consolidating, which can lead to new highs.
ETF Model Image Capture (for trading day 2011-08-26)
GDP just revised down to 1%. This is as good as a recession.
EBAY is pretty much flat. MRK down over 1% and FXP and ERY are both up over 2%.
Anything negative coming out of Jackson Hole would likely kill the market today. The morning sentiment is already quite negative.
Morning traders. I’m looking for pretty much nothing coming out of Jackson Hole which should send the market down lower. If that is the case I will look to buy for a swing trade, especially if the SPY can get down to the 112.50 level. Out of my HD callls for a 25% gain. Could have gotten 35% if I had been quicker on the trigger.
Congrats on the HD call. That’s quite a swing for that call option even though the underlying stock didn’t get much
Haha Ben is really making the market unhappy.
Looks like I was right about the Bernanke thing. The SPY didn’t get down to my level though. About a buck short, so I didn’t get in. Market is coming back so far.
yea but the situation is still a bit hopeless.
Absolutely! I’m talking short term here. I am mostly in cash and chomping at the bit to start shorting. Probably start towards the end of next week. Then if the market goes higher I will add to my shorts.
ES now rising.
Here is a possible day trade on HD again. Just put your stop below the 33.61, maybe at 33.56.
That’s a nice trade!
Anyone who took this trade would be wise to raise their stop to even. Play it safe. My first target is at 34.37. I would sell half there. My second target would be the sloping line at about 34.70 about now. This target would be hit if the masses jump on as the hurricane chatter increases. If target 1 is hit, raise your stop on the second half of your trade a little.
Target 1 hit and bounced off. Hopefully it can break through on a second or third try. I just got back from getting my hair cut. Now I live just southwest of Philly and not going to get the full effect of the hurricane(I hope), however I passed by my local Home Depot and there was a line of cars waiting to turn into the parking lot!!! Now I see CNBC talking about HD and Lowes. Media will continue to hype, hype, hype. HD getting close to that target 1 again.
Gold might be on its way to 2,000 after the correction. This is insane. Silver is now playing the catch up game. Gold is outperforming silver this year so far.
Silver is too scary even for me. Gold has to break these two support levels before I am a buyer. Would love to see that bottom support level hit.
Are you getting back in the HD trade if it reaches the support level again?
I got in at 33.88 as per my chart. Sold half at 34.37, again as per my chart. It just touched it for a second time. Maybe third times the charm.
Looks like bullish consolidation on the SPY chart to me. perhaps a run tp 119 before the close.
First up week in a while
Ok guys, be safe from the hurricane. Hope more people can participate on the discussion board.
The hype on the hurricane will fizzle out as it is falling apart. If you look real close at it there is no eye and it is still in the water. It will end up being a major rain event. Unlike the market they can’t manipulate mother nature. Anyone notice how gold rose into close with an “up” market? Usually gold rises in a “down” market.
Oh my god Dsavill. Where have you been? As one of the most loyal participants since 4/21, you were surely missed. Yea we now have the capacity to update every single day. Thanks for the support. I did nothing more than buying some spare battery and extra water and groceries, which needed to anyways. It is a bit hyped. We will see what happens tomorrow and Sunday. Enjoy your weekend
I come here every day Sun no worries.
I hope you are right dsavill, but I think there will be major damage. Perhaps not as bad as they are predicting, but bad enough. Just the fact that it is hitting such a populated area should make it deadly and costly. Gold did finish strong. Its correlation to the market has been somewhat erratic at times this week. Be safe everyone and have a great weekend.
Here is a picture of my hurricane supplies. Flashlight, BandAids, Advil, and refreshments! Take care.
Haha nice one Brownie. You can party for a few days with those supplies. You can call it the FocalEquity party haha
Tze, I took this picture as a joke and put it on my facebook. We really don’t drink that much. That’s why we have so much booze on hand. Anyways, that’s my story and I’m sticking to it! Stay safe Tze and hope to see you here on Monday.
Good one Brownie that’s how we do it down here in hurricane alley lol. I was in Wilma back in Oct 2005 which was the strongest fastest hurricane that hit the US coast. It came to Cat 5 status in just one day and by the time it hit us here in Naples it was packing 14o mph winds with and eye of 80mi across. Wilma tracked across the state with eye intact and did the same damage on the other side of the coast as well. Like I said yesterday Irene fell apart down to a cat 1 and will be a major rain event. The fuel for hurricanes is warm water and the further north they go the water becomes cooler. If Irene had cut over into the gulf I’m almost certain that it would have been a much more devastating storm.
Dsavill, I used to live just south of Ft. Lauderdale and was there for Andrew. I hear what you are saying about Irene weakening, but up here it is a little different. We have the rainiest Aug on record as of last week. We’ve had a couple more inches of rain this week. This will be a major flooding as the ground is already saturated. The trees are different from Florida’s and even tropical force winds will bring many down with this saturation of the ground. Hope I’m wrong. We’ll know soon enough.
I understand bro but Irene is nothing compared to what I went through trust me. As far as water this whole state is water.
I hear ya loud and clear. I have experienced a couple hurricanes, but never one that I had the eye wall hit. Big difference. I can’t even imagine a Cat 5 eye wall. Just saying that this will be costly in dollars and lives. Yours takes the cake in the scary. Wouldn’t wish that even on Sam.
Flash lights were sold out in several stores I passed by earlier today here in Massachusetts. But I managed to one of those flashlights that do not require battery. All you have to do is wind it for 1 minute then you can use it for 30 minutes at a time. What a brilliant device