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Swing Plays - June 11 - The saving grace of the rally (at least in the $COMPQ) were the beaten up semiconductors and the utilities.

These articles describe the statistical probabilities of long positions on these equities, based on neural net projections, for the next 5-15 trading days. These are not holy grail methodologies, the road to easy street, or anything else. These projections are the result of screening for technically significant retracement and momentum patterns that have been further screened for value and bullish sector performance. In other words, the projections are for long positions.

For 06/11/2007:

 
                                        $INDU            $SPX             $COMPQ

Monthly Momentum    Positive         Negative         Positive

Weekly Momentum     Negative         Negative         Negative

Daily Momentum         Negative         Negative         Negative

Note: (OS) means oversold and (OB) means overbought. The value to price estimate (it is not a guarantee, only a cash flow based estimate) can be defined loosely as a multiplier of price. A number higher than one means the stock is undervalued using this model and a number less than one means the stock is overvalued.

U.S. equity markets attempted to recover the losses of the last three days, but it did so with a fifth less volume than the day before. The saving grace of the rally (at least in the $COMPQ) were the beaten up semiconductors (INTC, TXN, MSCC) and the utilities (AEE, AEP, AES, AYE, DTE, ETR, EXC, FPL, PCG, TE). It would seem only natural that stocks that would be most considered proxies for bonds would attempt a recovery rally after such a huge sell off. Insurers of all stripes (ALL, CB, HIG) and homebuilders (BZH, HXM, RYL) would fit in that same category. One of the world’s largest money center banks (C) counts as well. One foreign bank (BAP) also made the list.

The rest of the stocks on the bullish reversals list that made the initial screens were a hodgepodge of scientific instruments (DNEX), healthcare stocks (BDX, STKL) food (STKL), drugs (ABT), conglomerates (DD), computer services (IT), foreign financial services (DB), retail (DKS), and employment services (MNST). The long energy stock making the list was LINE, the lone media company was TWX, and the lone consumer goods company was CLX. One ETF, EWI (Italy) also hit the initial screens.
 

In the end, only one utility passed the final screen.

Here is what the nets saw today: 

                        Value/Price est.   7 day ATR   %( 7 day ATR)/Close

ETR 2.57/1 75.6%               1.23    2.92           2.74 

A word of caution is in order here. Even though monthly momentum tweaked up because of Friday’s large rally, June is not even halfway in the books yet. We are going to be receiving critical information this week on PPI and CPI, and bond and stock traders are going to be locked and loaded to make position changes at a moments notice. For that reason, trading interest rate sensitive stocks (like the one above) should be suspected (and probably expected) to be volatile and subject to greater than average volatility. Caution is definitely advised here. 

The metal of this nearly vertical rally is about to be challenged. We will have to remain patient to see what happens next with the patterns.

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