Date: June 8, 2008
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Fundamental Data provided by Investors Business Daily
F.I.T. STOCKS
Finding High Quality Growth Stocks to Build Healthy Investment Habits.
Market Update
MARKET HEALTH: Market in CORRECTION! The New Rally attempt in the S&P 500 and DOW Jones Fails. The NASDAQ's rally attempt is barely holding on.
In our prior newsletter it appeared the major indexes were making an attempt to begin a new rally. A new rally begins when the major indexes close up from the previous days close. When this occurs we then look for a heavy accumulation day 4-11 days after the first rally day to confirm the move. Volume should swell 1.7% higher than the previous day's volume to confirm the new rally. If on any of these rally attempt days the indexes move below the low of the first rally day, the rally is considered a failed attempt and the count for a new rally day starts over. Last week the S&P 500 and the DOW Jones both failed to make a new rally, so they are both back in a correction mode. The NASDAQ has been holding up stronger, and has not yet headed lower than the first day of its rally attempt. So the new rally attempt in the NASDAQ is still in tack and we are heading into day 10 for the NASDAQ's confirmation to occur. Most likely the NASDAQ will eventually follow the lead of the other 2 indexes and fall back into correction mode.
Once again, the markets direction seems to be driven by the headlines of the day. The big ones being OIL, Investment Banks and the credit crunch, Mortgage Failures, Unemployment, and fears of a recession. For the week, Crude Oil jumped more than $16, most of this coming on Thursday and Friday. Unemployment peaked at 5.5% making it the biggest one month surge in over 20 years. Rumors of Lehman Brothers trying to seek a Fed Loan rattled investment bank stocks. Homes entering Foreclosure rose .99% compared to .58% a year earlier. There are a lot of people out there nervous about the current condition of our economy and the Big Institutions appear to be selling out of their portfolios.
The NASDAQ for the week dropped 1.9%, the DOW Jones 3.4% and the S&P 500 finished 2.8% lower. In the past three weeks we have gone from confirmed rally, to market correction, to attempted new rally, and back to markets in a correction. It is in these tricky market conditions that we must use be disciplined, patient, and persevere. We must follow our investment plan rules with no questions asked. If your stock hits a sell rule YOU ARE OUT. IF YOU CAN TAKE A PROFIT TAKE IT. The key is to cut your losses short and capture profits. We have had a nice run since the March 20 rally began. Corrections are part of the investment business and like it or not a valuable part of it, as it allows stocks with sound fundamentals to build new bases. As stocks build new bases it will mean new opportunities for powerful profits.
Watch the markets closely next week as it appears as though the S&P 500 and the DOW are heading for rough times. The NASDAQ has held up stronger and still qualifies for a new rally attempt. However we will be heading into day 10 of the NASDAQ's time to confirm this new rally, so we would suspect either its time will run out on day 12 or it will follow the lead of the other two indexes. As always, we can only speculate which way the markets will turn, but AS HEALTHY INVESTORS WE KNOW THE MARKET IS ALWAYS RIGHT! BE DISCIPLINED!
Let's take a look at the Charts from last week.
NASDAQ
6 Month Chart with Daily Price Bars.
Last Weeks Newsletter Chart
This Weeks Chart!
The NASDAQ's uptrend is still in place, but it is resting right on its support line. Once again the NASDAQ was unable to push, and remain above its 200 day moving average. #1 shows the first day of the rally attempt in the NASDAQ. If the NASDAQ breaks below the low of the first day of the rally at 2448, this new rally attempt will be a failure and look for the NASDAQ to continue further down as this will break the NASDAQ below its upwards support line. The next spot after this is whether the NASDAQ will be able to hold its 50 day moving average. If it cannot, we could be in for a rough spell in the markets.
S&P 500 - 6 month chart with daily price bars:
Here is a picture of the new rally attempt failure in the S&P 500. #1 is the first day of the rally attempt. Prices close above the close of the previous day. On day 5 of the rally attempt prices dip below the low of the first days rally attempt. This rally has now FAILED! On day 9 prices actually close below the low of the first day and burst through the 50 day moving average, #2. This very well could spell TROUBLE for the S&P 500. We may very well see the S&P 500 now free fall down to test its last low of March 19 at roughly 1260. It does appear at this time that we may be beginning a new down trend in the S&P as we have started to make lower highs and lower lows once again.
Top 10 Industries:
- Oil and Gas - US Exploration
- Energy - Other
- Steel Producers
- Oil and Gas Can. Expl. Prod.
- Oil Gas and Drilling
- Chemicals - Fertilizers
- Oil and Gas Field Services
- Metal Products and Distribution
- Oil and Gas Machinery Equipment
- Transportation Rail
Important Message:
Please remember as you build your portfolio, you are trying to find the best player for each position. Another words find the best stock in a leading industry. DO NOT buy two leading stocks in one industry. We are trying to build the dream team. One stock, one industry, then fill another position depending on your portfolio size and money management guidelines. When we list our F.I.T. Stocks selections, please make sure as you enter in your trades that you have not already filled that position or industry.
F.I.T. Stock Break Outs
| Symbol |
Newsletter |
Breakout |
Base |
Buy |
Closing |
% |
Exit |
Exit |
Profit/ |
Notes |
| |
Date |
Date |
Pattern |
Point |
Price |
Change |
Date |
Price |
Loss |
|
| MA |
3/23/2008 |
4/1/2008 |
C/H |
222.43 |
295.73 |
33% |
5/23/2008 |
$273.22 |
73.3 |
| RRC |
3/30/2008 |
4/2/2008 |
FB |
65.73 |
72.3 |
10% |
5/22/2008 |
$72.30 |
6.57 |
| RIG |
3/23/2008 |
4/4/2008 |
C/H |
145.13 |
159.64 |
10% |
5/21/2008 |
$159.64 |
14.51 |
| SID |
4/6/2008 |
4/8/2008 |
FB |
40.23 |
51.9 |
29% |
5/19/2008 |
$51.90 |
11.67 |
| MON |
4/6/2008 |
4/16/2008 |
DB |
123.93 |
114.89 |
-7% |
5/1/2008 |
$114.89 |
-9.04 |
| BCPC |
3/23/2008 |
4/16/2008 |
U |
24.33 |
22.66 |
-7% |
5/1/2008 |
$22.66 |
-1.67 |
| VMI |
4/13/2008 |
4/16/2008 |
U |
99.23 |
117 |
18% |
5/19/2008 |
$117.00 |
17.77 |
| GMXR |
4/6/2008 |
4/17/2008 |
U |
40.23 |
37.42 |
-7% |
4/29/2008 |
$37.42 |
-2.81 |
| DRS |
4/6/2008 |
4/16/2008 |
C/H |
59.43 |
78.56 |
32% |
5/8/2008 |
$73.84 |
19.13 |
| ARD |
4/20/2008 |
4/21/2008 |
U |
44.83 |
53.79 |
20% |
5/21/2008 |
$53.79 |
8.96 |
| FAST |
4/27/2008 |
5/2/2008 |
C/H |
51.43 |
47.83 |
-7% |
5/21/2008 |
$47.83 |
-3.6 |
| CPO |
5/4/2008 |
5/6/2008 |
C/H |
47.33 |
46.07 |
-3% |
5/23/2008 |
$46.07 |
-1.26 |
| SNHY |
5/4/2008 |
5/6/2008 |
C/H |
32.33 |
39.1 |
21% |
5/22/2008 |
$39.10 |
6.77 |
| SBS |
5/4/2008 |
5/5/2008 |
U |
54.63 |
51.9 |
-5% |
|
|
-2.73 |
| WGOV |
5/11/2008 |
5/15/2008 |
C/H |
37.19 |
38.4 |
3% |
|
|
1.21 |
| ABB |
5/4/2008 |
5/14/2008 |
U |
32.43 |
31.72 |
-2% |
|
|
-0.71 |
| GNA |
4/20/2008 |
5/5/2008 |
C/H |
16.58 |
17.77 |
7% |
|
|
1.19 |
| FLIR |
5/11/2008 |
5/19/2008 |
C/H |
35.73 |
37.55 |
5% |
|
|
1.82 |
| MUR |
5/18/2008 |
5/19/2008 |
U |
93.64 |
93.32 |
0% |
|
|
-0.32 |
| TITN |
5/18/2008 |
5/19/2008 |
U |
24.65 |
25.25 |
2% |
|
|
0.6 |
| MPWR |
6/1/2008 |
6/5/2008 |
C/H |
26.03 |
25.8 |
-1% |
|
|
-0.23 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| TOTAL x 100 Shares: |
|
|
|
|
|
|
|
14113 |
** MONITOR THE FOLLOWING F.I.T. STOCKS HIGHLIGHTED IN YELLOW CLOSELY FOR PRICE AND VOLUME MOVEMENT! Look for light volume on down days and heavy volume on up days. Remember if we head into another big correction, it is best to start turning to cash now. You should be out of all other F.I.T. Stocks at this time as we have either hit our profit targets or the stop loss.
F.I.T. STOCK EDUCATION
This week we are going to start studying the inverse relationship of specific Electronic Traded Funds (ETF's). These specific ETF's may help us earn some money or at least protect ourselves during a correction. We will focus on the ETF's of the major indexes and the financial sector. If the market starts to turn south we still may want to participate and profit from the action of the market. These 5 specific ETF's sell short their specific index or sector, however you BUY the ETF like a stock.
Let' take a look at 3 ETF's and their inverse relationship.
1. QQQQ vs. QID
QQQQ: Powershares QQQ
QID: Pro Shares Ultra Short QQQ
Here it is clear to see the inverse relationship. Since March the QQQQ's have been in an upwards channel and the QID's have been in a downwards channel. Friday the QQQQ' has heavy selling pressure while the QID's had heavy buying momentum. QID runs opposite of the QQQQ's, so when the QQQ's are heading down we should be buying QID. If the NASDAQ and the QQQQ's break below their support line of this upwards channel, buy a small amount of QID or paper trade QID if it breaks above the resistance of its downward sloping channel line. Use this as a study.
2. SPY vs. SDS
SPY: S&P 500ETF
SDS: Pro Shares Ultra Short S&P 500
Notice the opposite or inverse relationship again. As the SPY's broke below their upwards trendline, the SDS's pierced through their downwards sloping resistance line. On Friday, the SPY's registered a big volume down day, while the SDS's posted a big volume up day. Again, we could test our theory by buying a small amount of SDS if the S&P 500 and the SPY's continue to head south. It looks like right now that SDS may have clear sailing until $65.
3. XLF vs. SKF
XLF: Financial Select Sector SPDR Fund
SKF: Pro Shares Ultra Short Financials
Once again while the XLF has been selling off on strong volume, the SKF has been moving up on strong volume. As XLF broke below a key support level of $24, SKF shot through a key resistance level $118 on strong volume.
Please remember, all of the above Ultra Short ETF's are used only when the tide of the market is in a correction mode or downtrend. So when QQQQ, SPY or XLF are moving into a downtrend, QID, SDS, and SKF will be moving into a up trend and thus can be bought like a stock to profit from the correction.
Please be advised to study these inverse relationships before investing in them to make sure you fully understand how this works. Track the charts and entry and exit points on paper first to gain a better understanding of how ETF's work. Please let F.I.T. Stocks know if you have any questions.
Please remember to stick with your Investment business plan, be disciplined, monitor price and volume daily and make money.
Happy and Healthy Investing,
Steve Martin
Founder
www.fitstocks.com