Stock Highlights:

Bank of America (BAC) – seems to found support at the low $5 range. It has been trading in a choppy sideways fashion since then and rallied close to 40% off its October low. It continues to rank well in our stock ranking model (8 of out 3,517)

NKE – NIKE

It’s apparent that NKE is struggling making new highs. It’s very possible that it formed a top in late October. It continues to rank poorly in our stock ranking model (3,471 out of 3,517)

Key Leveraged ETFs:

TMF - Direxion Daily 30-Yr Trsry Bull 3X Shrs

The 30-year treasuries are rallying again, indicating weakness in the stock market is emerging once again. With the 200 SMA rising, there is nothing that prevents TMF from going higher from here. Currently, it ranks in the top quintile 1 of our leveraged ETF universe.

Stock Highlights:

1. Bank of America Corp NYSE:BAC

BAC’s ATR peaked while in the downtrend, indicating a change a trend maybe taking place. It’s now over the 20 & 50 SMA breaking its downtrend. The stock has a steller ranking of no.8 out of 3,517 in our stock ranking model.

2. NYSE:YUM Yum! Brands, Inc.

Yum Brand is struggling to make new highs and we could argue it is currently exhibiting a potential H&S pattern. The stock ranks poorly in the stock ranking model with a ranking of 3,475 out of 3,517.

Key Leveraged ETF Highligt:

1. AMEX:YCS ProShares UltraShort Yen (ETF)

The Japanese government is intervening to stop the Yen’s relentless appreciation. Current YCS ranks in quintile 2 of the leveraged ETF model. Currently, we still do not see any signs of a reversal in YCS, but it may be in a bottoming process.

To understand why the financial stocks are the leading indicator of the U.S. markets one must note the major default issues in Europe. The U.S banks have exposure to some of the debt through derivatives and other means. In addition, any mass problems in Europe are now a global issue. Any lack of recovery or further slowdown in the world, only goes further to hurt the housing market in the U.S. This means more defaults and more problems for the banks. The issues go far deeper but let’s keep it as simple as possible.

On a short term basis yesterday was a great example of the bank stocks leading the market. Yesterday, the markets were in panic mode over Europe once again. However, the bank stocks were surprisingly strong. Even the weakest of the group, Bank of America was flat to positive a good portion of the day when the markets were down sharply. Sure enough, the markets turned around and closed with a move higher.

Again today, the bank stocks are strong. Sure enough, the markets are higher.

Gareth Soloway
InTheMoneyStocks.com

The stock model is updated to reflect today’s market move. You can download the entire model Excel output file here: StockModelFile_20110824 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.

This morning we focus a long position in BAC (Bank of America) and a short position in MU (Micron Technology, Inc.) Charts are provided by contributor Roller Coaster.

According to our ranking model, BAC’s valuation is extremely cheap at the moment. We can tell from our book, PE and PEG related composite value factors. However, it can get cheaper! It made a new low on high volume, but it didn’t fall too much.  Potentially, we can see a relief rally here.

Micron Technology ranks poorly within the FocalEquity Stock Ranking model because its valuation related metrics are particularly unattractive relative to its industry peers. This stock has been declining without any significant retracements.  It’s possible this stock will continue to fall until it finds support.

ETF Model Update:

You can download the entire ETF model Excel output file here: LeveredETFModelOutFile_20110824

Today we like to highlight DRN (Direxion Real Estate Bull 3X). With the huge rally yesterday, many of the bear ETFs generated sell signals in the model. You should carefully look at each trading signal and ask us questions on our blog if you are uncertain.

DRN had a strong close on high volume August 9, 2011.  It’s pulled back recently on light volume.  There can be another push higher from here.

ETF Model Image Capture (for trading day 2011-08-24)

Gold is lower today. This is a key component for any rally in the stock market. Gold rises on fear. As fear has been jumping, gold has seen an epic move up. Finally, today it is moving lower. This signals a possible pivot top in gold short term and also adds credence to the market starting an upward move. The SPDR Gold Trust (ETF) (NYSE:GLD) is trading at $183.07, -1.52 (-0.82%).

Lastly, banks stocks flushed early. Banks have dragged the markets sharply lower in recent weeks on worry over debt exposure in Europe. However, after an initial flush, stocks like Goldman Sachs Group, Inc. (NYSE:GS), JPMorgan Chase & Co. (NYSE:JPM) and Bank of America Corp (NYSE:BAC) have all turned positive. Not only have they reversed from major early losses, but a bottoming tail is now on the daily chart bottoms. This again, adds credence to a possible move up coming on the markets.

Gareth Soloway
InTheMoneyStocks.com

The stock model is updated to reflect today’s market move. You can download the entire model Excel output file here: StockModelFile_20110822 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.

The stock we are highlighting for this morning is YAHOO (Yahoo Inc.). This stock is attractive on several valuation fronts as indicated by our ranking model. In addition, the stock appears to be strong based on our contrarian indicator. (Chart produced by contributor: Roller Coaster)

This is a long candidate for YHOO based on the FocalEquity Stock Market Ranking.  The stock may have found support from the 2009 low.  It has moved up aggresively recently, and is now in a pull back.

ETF Model Update:

You can download the entire ETF model Excel output file here:LeveredETFModelOutFile_20110822

Even though the bear ETFs continue to have the upper hand, we are beginning to see more positive sentiment for bull ETFs especially in emerging market and oil through the weakened rankings of FXP and DUG.

The banks and oil plays are still hovering on the positive side today. The banks have been the weakest sector over the last six months and are clinging to a minor technical bounce. With the markets lower across the board, Bank of America Corp (NYSE:BAC) is trading at $7.42, +0.02 (+0.27%) and Wells Fargo & Company (NYSE:WFC) is trading $24.62, +0.07 (+0.29%).  Oil stocks continue to be generally higher even with a lower market. This is on the back of a recent big bounce in oil and even today, the energy source is slightly higher. There is talk of continued global printing of money. As long as this happens, all commodities should see a rise. Exxon Mobil Corporation (NYSE:XOM) is trading at $73.66, +0.16 (+0.22%).

Investors remain very nervous. Right now the charts are signaling continued consolidation and then another move higher towards the $125.00 level on the SPY. That view will hold true unless the $117.00 level is taken out.

Gareth Soloway
InTheMoneyStocks.com

J.P. Morgan Chase & Co.(NYSE:JPM) is the leading bank stock in the United States. This morning, JPM stock is trading higher by 0.93 cents to $36.84 a share. As long as this stock continues to trade higher throughout the trading session it would be prudent to expect the major stock indexes to remain strong. Should JPM stock begin to come under selling pressure traders should expect the market indexes to pullback as well.

At this time, JPM stock and the large financial companies are essentially the stock market. The European Union crisis is really a banking crisis. The large financial stocks have indicated exactly where the markets were going to trade before the recent decline. Traders should continue to follow the large financial stocks very closely. Some of the other large financial stocks that are trading higher this morning include Goldman Sachs Group Inc.(NYSE:GS), Morgan Stanley(NYSE:MS), and Bank of America Corp.(NYSE:BAC).

Nicholas Santiago
InTheMoneyStocks.com

On the flip side, these markets are extremely oversold and extended. This market can certainly go lower over the course of the year, however, in the short term this market is due for some kind of significant bounce in the near term. There are so many stocks that have been decimated over the past two weeks. Many of these stocks are trading around important support levels. Volume has also been massive and this is generally a sign that the selling could be getting close to subsiding.

Often traders and investors usually sell out at these levels when fear increases, however, this is when traders should begin to take small shots at long positions for bounces. Should a stock market bounce occur it may not last very long, although if and when a bounce does take place the short term bounce could be significant. As a good rule of thumb, if you are uncertain just stand aside. There will always be better trading environments.

Some stocks that look attractive at this time include Amazon.com Inc.(NASDAQ:AMZN), Citrix Systems Inc.(NASDAQ:CTXS), and Rackspace Hosting Inc.(NYSE:RAX). All of these stocks have pulled back into significant support levels. Traders must still be cautious at this time, if the major stock market indexes continue to break lower everything will trade down with the indexes.

Nicholas Santiago
InTheMoneyStocks.com

Bank of America Corporation (NYSE:BAC) has the chart and trading history to be a big mover on any deal. The daily chart shows a beautiful bullish consolidation pattern here at $9.80. The stock bottomed recently and ever since has been one of the strongest in the market. This retrace gives buyers a second chance to catch this lightning in a bottle.

The bank stocks have all been under pressure over the last six months. However, recently they have outperformed. This tells smart Wall Street players that the financial plays are the place to be when a debt ceiling extension is completed. Other great plays would also be Morgan Stanley (NYSE:MS), Goldman Sachs Group, Inc. (NYSE:GS) and Wells Fargo & Company (NYSE:WFC).

Gareth Soloway
InTheMoneyStocks.com