Wednesday, August 17, 2011

The Stock Market Through Charts

The reason we look to the charts is to get an idea where stocks have been and what a potential scenario lies ahead for equities.  Even though we are intermediate to longer term investors, viewing charts can give us an edge on entering or exiting a position or hedging a portfolio in the short term need be.  So what are the charts showing us through mid week. Stocks have been consolidating recent gains over the last three days as shown below by a 60 minute chart of the S&P 500 index.
I talked about Fibonacci retracement levels before in this post Fibonacci Retracement.  The chart below shows that stocks have consolidated around the 38.2% level, which is typical Fib consolidation prior to a potential move higher
Bottom Line:  Charts are just one of many tools to help manage risk. Fundamentals and valuation are two other important areas of focus when analyzing individual stocks or the market as a whole.  This weekend I am going to dedicate a post to just the fundamentals of the market and where stocks are at present.  As always thanks for stopping by.


Thursday, August 4, 2011

Market Capitulation?

Many characteristics of a market bottom were displayed today.  Highest volume day of the year, VIX fear index breaking higher, and bonds all moving higher at the same time. First lets take a look at the S&P 500 ETF (SPY).  This index traded the highest volume of the year.  Notice the high volume today.
The VIX index, also known as the fear index, rises when puts are purchased to protect portfolios.  As seen below this index rose 35% today.  Not quite as high as last years market correction, but still high.  I look at this index as a contrarian indicator.
Bonds moved higher yet again as investors move into a safe haven regardless of the low yielding return.  Below is a chart of the bond ETF (TLT) breaking higher for the year.
Bottom Line:  Just because these are the signals I look for in potential market bottoms, does not necessarily mean we are there yet.  But as always, there will be some stocks beaten down for little reason other than the overall market moving lower.  Thanks for stopping by.

Wednesday, August 3, 2011

DNDN 2nd Quarter Results

We held shares of DNDN back in May here Dendreon Preview before they reported 1st quarter results.  We sold the shares in after hours after they announced 1st quarter results for a small profit. I did not feel at the time that the guidance was particularly strong and they would struggle to meet 2nd quarter results, so we sold the shares. Today investors are fleeing the stock as 2nd quarter results missed revenue estimates.  Analyst were calling for 58M in revenues and the the company only produced 49M.  But also the company refrained from giving any future revenue guidance.  Below is a chart of DNDN with the after hours drop in share price of -61%.
Bottom Line:  Growth stocks that do not perform as expected will get sold off.  I wonder how many investors went into earnings holding shares without any option hedge or worse yet owned shares on margin.  For a small amount they could have bought put protection, and this sell off could have cost them next to nothing.