Trade Ideas for 05/04/09

The S&P chopped all day Friday, cycling rather frequently between red and green, before closing at its highest level since the uptrend began. However, action was so choppy that the prospect of having even a positive close was questionable going into the last twenty minutes. Tuesday marks 60 days from the March low, so there's an appeal to the idea that the market might have gone sideways in order to make a turn on, or at least closer to, that date.

While the index made a lower low in the morning, it was not much lower, and both counts I alluded to last time remain valid. These counts follow.

Friday's choppiness supports the character of a wave 2 (as depicted above) during which the new trend (in this case down) has not been well-established, and echoes of the prior trend exert an influence, leading to prolonged indecision among market participants.

On the other hand, the red trendline was well-defended in the last half hour of trading, leaving open the possibility of a run to another higher high.

The interesting sectors Friday were real estate and financials. These were the leaders on the way down, and they were at the forefront on the way up. On Thursday while the major indices made new uptrend highs, these sectors fell short; in fact the financial sector has not participated in the mini-rally that started April 21st, being unable to get higher than its April 17th high. Both sectors closed in the red Friday. This is a reason to keep a bearish outlook, as leaders lead.

If you opted for the aggressive entries on Thursday's ideas, you would've bought all of them when the market made an early lower low. The more conservative entry points were not hit.

Current Holdings
Ticker	Basis	Closing Price	Perf.	Sell-Stop	Additional Exit Guideline	Chart
DGP	18.68	18.25	-2.3%	17.96	N/A	Chart
GOLD	45.56	49.56	+8.8%	47.90	N/A	Chart
TWM	49.84	49.25	-1.2%	46.58	N/A	Chart
SDS	64.71	63.14	-2.4%	61.49	N/A	Chart
DXD	53.94	52.80	-2.1%	51.59	N/A	Chart

Continuing the thought above, and for those who chose to hang back on Friday's ideas, Monday's theme is to pick on the weak sectors.

New Trade Ideas

Ticker	Entry	Exit A	Exit C	Chart
SRS (Ultrashort Real Estate)	26.37	23.69	N/A	Chart
SKF (Ultrashort Financials)	61.47	55.99	N/A	Chart

Please refer to "How To Trade The Ideas" (right-hand side) to read this table.