by Ryan Mallory

Reversal Indicator shows price action topping out possibly in the short-term

Today's market action gave us the biggest intraday reversal that we have seen on the S&P 500 this year. At this point the reversal has seen us drop 22 points. 

We got as high as 1687 at one point and like I've been saying lately in my daily trading plans, I think it is going to be difficult for us to seamlessly push through the 1700 level, and today that is exactly what I believe was happening when we reversed hard only 13 points from 1700. 

The SharePlanner Daily Reversal Indicator shows that we may, at best, start consolidating and more likely setting up for a pullback in the short term. How big that pullback is, I have no clue. It may not be hardly anything at all, but what I think the message to take away from the SPRI here is that the upward momentum is going to slow down some from here. 

Here's the SharePlanner Reversal Indicator.

by Ryan Mallory

The things we see in the news these days...and today is no exception. Here is a few clips of some of the news makers that are really getting under my skin... 

Pervert Anthony Weiner:

The scandalous Louis Lerner keeping her trap shut

And the freakshow Jodi Arias talking about her charitable contributions

by Ryan Mallory

Pre-market update (updated 8:30am eastern):

• European markets are trading 0.1% higher.
• Asian markets traded 0.3% higher.
• US futures are slightly higher.

Economic reports due out (all times are eastern): MBA Purchase Applications (7am), Existing Home Sales (10am), Bernanke speaks (10am), EIA Petroleum Report (10:30am), FOMC Minutes (2pm)

Technical Outlook (SPX):

• We finished higher yet again yesterday, however, the action falls along the lines of the consolidation argument I made earlier this week. 
• You have a trend-line that is much steeper and short term off of the April lows, that lends rising support at 1645.. 
• Along those same lines, the 10-day moving average continues to be an excellent gauge for determining short-term market strength, as long as price manages to stay above it, the market undoubtedly remains bullish. 
• A bearish divergence yesterday to take note of in the VIX as it rose nearly 3% despite the market moving higher as well. This has become more common place in the market of late. 
• 30 minute chart is starting to look like a possible double top is forming. 
• I think that we are likely to see more consolidation this week, as there is little in the way of news that can affect the market's outlook. 
• Drawing a Fibonacci retracement on the most recent market rally, from the April lows, has a 50% retracement at 1604. A 38.2% retracement would be a 1620. 
• My biggest concern, and the reason why I think we will ultimately see some consolidation here, is how far removed the SPX is from the rising trend line off of the November lows. 
• Eventually the equities bubble we are in right now will burst, but until then, you have no choice but to trade to the long side. 
• I do have big reservations about whether this market can truly get up to 1700 as quickly as it is trying to do. It has gone straight up since crossing 1600, and bulls have become gluttons in their market outlook. 
• Traders will point at the fact that we are overbought but we have been since April - move on, nothing to see there. 
• We are up seven straight months, the last time we saw such a rally was when the market bottomed in 2009. 
• Markets don't care about the economy. That is not what is driving them. The markets only care about what the Fed is doing to keep equities propped up. 
• We haven't seen a market pullback in excess of 4% since October/November time-frame. 

My Opinions & Trades:

by Ryan Mallory

I consider today's action and that of yesterday more along the lines of consolidation as the market is still below yesterday's highs.

We could break that level before the end of the day, but time is limited as we are now in the final hour of trading. 

With every trade I make, I constantly feel incredibly uncomfortable, not because I don't think I should be trading to the long side, but because when this market finally comes to grips with reality, it won't be a pretty site. I am using tighter stops than ever before with this market, mainly because of my huge distrust for this market and what is keeping it afloat. 

With that said, there is no way in the world that you will could get me to pull the trigger on a swing-trade to the short side because there is absolutely zero, zilch, nada in terms of catalysts that the bears can sink their claws into. 

by Ryan Mallory

I've added all three of these stocks to my watch-list today, as I found the price action very inviting. 

As with any small cap/low dollar stock there is a lot more risk that is involved in trading them, but with that comes the alluring possibility of out-sized gains that might not otherwise be realized trading a large cap stock. 

The three stocks below, Frontier Communications (FTR), Revolution Lighting Technologies (RVLT), and Central European Media (CETV) all offer valuable trading opportunities for right now, and if you are into the small cap trading like I know many of you are, you would be foolish to not add these stocks to your watch-list just as I have done. 

And it just isn't swing-trade setups that you can use these for, I would say they also fall into the day-trading category just as much as I would consider them to be a swing trade too. 

Here are the three small cap swing trade setups. 

by Ryan Mallory

A dip in a stock is not necessarily the end of a stock, unless the dip buyers fail to jump in. 

Now that is what I call the motto of this stock market, stocks, and every instrument of trading that has been on a continuous upstream for the entire year of 2013. 

I've provided here a list of the stocks that are setting up nicely for an opportunity to get long on. I cleaned house last week with a number of stocks on the list as a number of stocks that I was following had simply lost the trade setup I was looking for and had become way to overextended to ever have an ideal trade setup in the near future. 

As a result I am using only those stocks in this list that have an opportunity for a trade opportunity to get long in the very near future. 

Whether it is on the pullback or the breakout there is something for everyone here. 

Few swing trade setups to keep an eye on

I've got a close eye on Kinross Gold (KGC) as it has shown over the last couple of months A LOT of accumulation in shares, and once it gets above $5.75, this stock will be ready to rock and roll. 

Pullbacks are not so common these days, but the one in Dean Foods (DF) has me interested and could very well push to new highs and be over $21.50 in short order. 

While I prefer eating at McDonalds (MCD) over Burger King (BKW), there is no doubt that the accumulation taking place in BKW could lead to a bigger move that puts the stock back over $20. Consider jumping in this stock over $19.10. 

Here's the rest of the my swing-trading watch-list. 

by Ryan Mallory

Pre-market update (updated 8:30am eastern):

• European markets are trading 0.2% lower.
• Asian markets traded 0.4% lower.
• US futures are flat 

Economic reports due out (all times are eastern): ICSC-Goldman Store Sales (7:45am), Redbook (8:55am)

Technical Outlook (SPX):

• The slightest of pullbacks yesterday, but might have been enough for the market to continue advancing forward based on past precedent. 
• I think that we are likely to see more consolidation this week, as there is little in the way of news that can affect the market's outlook. 
• Drawing a Fibonacci retracement on the most recent market rally, from the April lows, has a 50% retracement at 1604. A 38.2% retracement would be a 1620. 
• My biggest concern, and the reason why I think we will ultimately see some consolidation here, is how far removed the SPX is from the rising trend line off of the November lows. 
• There is a good deal of intraday support on the 30 minute chart with support lying at 1660. 
• Continue to follow the 10-day moving average and whether price on any pullback can hold this price level. 
• Yesterdays sell-off was (albeit a small one) was out of exhaustion, not due to any true bearishness. 
• Strong spike in the VIX taking it back up to 13. 
• I'm not to concerned about this market at this point. I think you want to keep stops tight in case of reversal, but not be afraid to add new opportunities where they exist. 
• Eventually the equities bubble we are in right now will burst, but until then, you have no choice but to trade to the long side. 
• I do have big reservations about whether this market can truly get up to 1700 as quickly as it is trying to do. It has gone straight up since crossing 1600, and bulls have become gluttons in their market outlook. 
• Traders will point at the fact that we are overbought but we have been since April - move on, nothing to see there. 
• We are up seven straight months, the last time we saw such a rally was when the market bottomed in 2009. 
• Markets don't care about the economy. That is not what is driving them. The markets only care about what the Fed is doing to keep equities propped up. 
• We haven't seen a market pullback in excess obf 4% since October/November time-frame. 

My Opinions & Trades:

by Ryan Mallory

Chart of the day...

Quick Glance at the Market Heat Map and Industries

Notables:

• Financials held in there. 
• Materials were strong... very strong. 
• Consumer Goods were horrific.   

Be sure to check out my latest swing trades and overall past performance Read more...

by Ryan Mallory

I like this trade setup quite a bit and has served me well so far with  Hornbeck Offshore Services (HOS). 

I swapped Diamond Offshore Drillers (DO) for HOS and the net gain between the two has been much better had I just stayed in overextended DO. 

The ascending triangle breakout at the highs is often times one of you most reliable trading price patterns that you'll find in a very strong bullish market. I also like how the coiling price action represents less than one-third of the total price move from the April lows. That helped confirm for me that he price move was much more of a temporary holding pattern than any shift in market sentiment, which gave me the trading edge I was looking for. 

Here's the HOS Swing-Trade Setup.

by Ryan Mallory

On Friday, I saw that DO was way outside of the upper Bollinger Band and based on past precedence, the last five times the stock had done that, it had led to near immediate sell-offs in the stock. Despite having only gotten in the stock the day prior, I decided to sell my position in Diamond Offshore Drillers (DO) for a quick 2.6% gain ($72.83 from $71.00). Despite being down 1.5% in the stock the day prior, that was a nice change in the winds for DO and one that I was glad to take considering how over extended the stock actually was. 

When I see such a precedent that has been set, I don't sit around waiting to see if it will happen for a sixth time, instead, I take the gains, and recommend you do the same, when you see past precedence establish such a clear verdict for price action outside of the upper Bollinger Band. 

Here's the chart showing you the clear signal.