Monday, August 23rd 2010, was one of the lowest volume days of the year. The morning’s news that Hewlett-Packard is bidding $24 a share for 3Par, beating the $16 a share offer from Dell, triggered a good upward move in the first few hours of the trading day but the move was short lived. Energy stocks opened up the first day of the new trading week in the minus column, after turning in two straight weeks of losses.

I don’t know how meaningful Monday is when you have such low volume. It is concerning that you have this negative sentiment going into the September and October worst seasonal months of the year.

Stocks ended lower Monday, led by industrials, materials and techs. Investors once again shrugged off a wave of merger and acquisition activity, which normally gives the market a boost.

On Tuesday August 24th, 2010, Crude continues to slide as the economic picture remains gloomy. Retail stocks fell Tuesday after existing-home sales suffered their biggest one-month drop ever in July. European stocks tumbled to a 5-week low in morning trade, with construction and cement shares taking a beating after Irish building supplies major CRH warned core earnings would fall 10 percent this year, signaling rising worries over the health of the U.S. economy.

Shares were also hammered in Tokyo, where the Nikkei average hit a 15-month closing low below 9,000 points, with hedge funds and foreigners seen selling amid mounting concern about the authorities’ inaction over the strong yen, which threatens a fragile economic recovery. The cheap Yen was used to buy stocks and assets around the world which was known as the carry trade. Now that the Yen is rising, the global bankers no longer have cheap money available to borrow. The rising Yen is contributing to global deflation which is pushing the value of paper money higher and higher.

Oil futures sold off as the U.S. driving season draws to a close with large stockpiles of gasoline remaining.

Airline stocks fell Tuesday for a fourth consecutive trading day, reflecting anxiety in the wider market that the economy is slowing down and could slip into another recession.

On Wednesday August 25th, 2010, Energy stocks continued to fall after worse than expected durable goods orders contributed to bearish sentiment.

U.S. financial stocks were under the gun again early Wednesday after Tuesday’s weak data from the manufacturing and housing sectors, but fought back to positive territory in a late-session rally after homebuilder Toll Brothers Inc. ended a streak of 11 straight quarterly losses. The Horsham, Pa., luxury builder posted a $27.3 million profit, or 16 cents a share, for its fiscal third quarter. Analysts polled by Thomson Reuters expected the homebuilder to lose 14 cents per share.

U.S. stocks rebounded in the final stretch of trading Wednesday, with investors ploughing into battered consumer-discretionary stocks, including those of home builders.

What this tells us is that professional traders are watching homebuilders. We should be to.

On Thursday, August 26th 2010, U.S. stock futures were lifted Thursday as Wall Street greeted a rare piece of positive news on the economy when the government reported that initial jobless claims totaled far less than expected in the latest week.

After last week’s disappointing figure, Thursday’s number is certainly a relief.

The report showed that the number of people filing first-time claims for unemployment benefits fell for the first time in three weeks, down 31,000 to 473,000.

But the early gains could not hold. The Dow Jones industrial average closed below 10,000 for the first time since early July. Many investors remain unconvinced that the economic recovery will hold.

Stocks have been in a downtrend since early August after charging ahead in July’s earnings season. Lots of poor indicators on the economy, especially weak home sales, has popped the sense of optimism brought about by a series of strong corporate earnings reports the month before.

On Friday, August 27th 2010, U.S. stock futures extended early gains Friday after the Commerce Department made a smaller than expected cut in its estimate of second-quarter economic growth. Investors found reassurance in Federal Reserve Chairman Ben Bernanke’s vow to do whatever it takes to revive the shaky economy. Bernanke’s comments reassured Wall Street the central bank will act if unexpected developments cause the recovery to falter.

Then after about 3 to 4 hours into trading, Intel (INTC) briefly helped take indexes lower after the chipmaker warned third-quarter revenue could fall short of its own estimates by more than $1 billion.

The market spiked down on the Intel news then reversed sharply and ended the day higher.

There was a lot of short covering off the key support level of 104.30. I think Bernanke’s comments and the coming weekend news cycle prompted a lot of bears to book some of their excellent 2 week profits. Friday was also options expiration day.

Bernanke told central bankers at a conference in Jackson Hole, Wyoming the recovery has weakened more than expected but the U.S. central bank was ready to take further steps if needed to spur the recovery.

Here at GuerillaStockTrading I predicted a double dip recession all the way back in early May with the wicked sell off in the Homebuilders Index (XHB) so I’m not really in agreement with Bernanke that the economy has weakened more than expected.

Once again, the S&P 500 closed down for the week as the current downtrend continues.

In the video below, I do technical analysis on SPY last week and show you a key support level you need to watch. The key support level to watch next week is $104.30 on SPY. We had a double bottom test of this level last week on Wednesday and Friday.

Important fundamental analysis reports to be released next week are:

Aug 31 Consumer Confidence
Aug 31 Minutes of FOMC Meeting
Sep 01 ISM Index
Sep 01 Auto Sales
Sep 02 Unemployment Claims
Sep 02 Factory Orders
Sep 02 Pending Home Sales
Sep 03 Nonfarm Payrolls
Sep 03 Unemployment Rate

Weekend recap for the master stock trader and last weeks critical events.

On Monday, August 16 2010 started out with bad news from Japan of a slowing GDP as weak growth in Japan added to worries about the strength of the global economy.

This negative news of a slowing global economy was partly offset as tech stocks lead to the upside on the news that Dell is buying 3Par Inc. for $1.13 billion. Acquisitions are seen as a bullish indicator for a sector for two reasons: first, the company doing the buying means they’ve got cash on hand or a credit line available that permits them to make the acquisition– second, the company being purchased by a larger company usually sees its stock spike as the purchase price of shares in the acquired company are made known. In this case, Dell agreed to pay $18 per share for 3Par and the stock quickly adjusted up to $18 for a quick 86% gain.

At the end of the trading day on Monday, stocks closed approximately where they opened.

On Tuesday, August 17 2010 experienced a gap up open following the Federal Reserve’s report that the nation’s industrial output in July climbed 1%, more than expected. The market was sent even higher on retail giant Walmart reporting second-quarter earnings of 97 cents a share, beating expectations of 96 cents a share. The retailer also raised its full-year outlook. But at around 11:00 AM things changed. The market experienced a big sell off into the closing. So most news organizations did not report on the dive in the last hour of trading because they may not have noticed it. With the markets closing up, that was all the news focused on. Guys like us know better. The reason why the last hour of trading is vital is that it is practically completely dominated by professional traders. The market eventually snapped its five day losing streak by closing up but that last hour of trading was lousy.

On Wednesday, August 18 2010 U.S. futures went up modestly as retail giant Target Corp. matched forecasts for earnings growth. Target reported second-quarter profits of 92 cents a share, in line with analysts but revenue of $15.53 billion came in a little bit short of forecasts for $15.58 billion. As traders read over Target Corp. and the softer-than-expected sales for the second quarter the snap decision by futures traders became overly optimistic. Then by mid-day, BJ’s Wholesale fell 3% as the retailer cut its profit and sales outlook for the year. Need for oil dropped as crude futures fell below $75 for the first time in 6 weeks. The Energy Information Administration said U.S. petroleum inventories dropped by less than expected in a bearish sign for the energy sector.

SPY reversed at about $110.40 and formed a Bearish Double Top. For the next 3 hours, heavy selling took place as the positive news from Target was entirely wiped out by the negative news from BJ in addition to dropping oil demand, both which verify the slowing economic growth picture.

Thursday, August 19 2010 saw the Labor Department reporting that initial claims for unemployment benefits went up by 12,000 to 500,000 last week. The third consecutive weekly climb pushed claims to their highest level since late 2009. The economy recovery is focused on jobs. I do not care what the talking heads say, there is no such thing as a jobless recovery. Three consecutive weeks of rising unemployment claims imply that the economic recovery isn’t just dead, but we are headed back down and starting to eliminate the economic recovery gains which have been made over the last year. The sectors leading the market lower on the bad jobs numbers were Industrial Goods, Basic Materials, and Consumer Discretionary stocks. The Industrial Goods sector consists of companies like Boeing, cement maker CEMEX, construction machinery like Caterpillar, building materials companies like Fastenal Co, residential construction like DR Horton and KB Homes, heavy construction like Fluor, metal fabrication like United States Steel, waste management like Waste Management, Inc., industrial electronic equipment makers like ABB Ltd. and Rockwell Automation Inc., and even small tools and accessories like Snap-on Inc. The Basic Materials sector is made up of oil and gas companies like Exxon Mobil and PetroChina, industrial metals and minerals companies like BHP, steel and iron companies like Vale and Rio Tinto, oil and gas drilling companies like Statoil ASA, oil and gas equipment and services like Schlumberger Limited and Halliburton Company, chemical companies like DuPont, oil and gas pipeline companies like Enbridge, oil and gas refining companies like Imperial Oil and Marathon Oil, and aluminum companies like Alcoa. The Consumer Discretionary sector is made up of companies like Pepsico, Kellogg, General Mills, Sara Lee, Campbell Soup, Procter and Gamble, Colgate-Palmolive Co., Avon, Philip Morris International, Toyota Motor Corp., Coca-Cola, Anheuser-Busch, Sony Corporation, Kraft Foods, Nike, Polo Ralph Lauren, International Paper, Canon, Archer Daniels Midland Company, Tyson Foods, Mattel Inc., Hasbro Inc., Whirlpool Corp., Harley-Davidson, Inc., Winnebago Industries Inc., and Newell Rubbermaid.

So we had a massive plunge on Thursday started by the bad unemployment numbers. However, if the bad unemployment numbers are what started the fire, then the Philadelphia Federal Reserve added fuel to the flame. In its monthly survey of economic activity in the Mid-Atlantic region, it indicated that business activities fell by 7.7 percent to the lowest level in more than a year. SPY dropped from 110 all the way down to 107.50.

My opinion on the mergers and acquisitions action last week is like, fine, how good that Fortune 500 companies are sitting on $2 trillion in cash and more buyouts are most likely coming soon. But this does nothing to correct the problem of high unemployment and the fact that an insufficient number of jobs are now being created. Companies are not using their extra money to add to payrolls, and eventually this will be the main reason we will have a double dip recession.

Friday, August 20 2010 began the day awful with SPY hitting a low for the week at 106.74. But 9:00 AM and on saw heavy buying for the rest of the day. The buying came from the Tech sector. But overall, SPY closed down for a second straight week on persistent concerns of how severe the second double dip in this recession will be.

Crucial fundamental economic reports to be published in a few days are:

Aug 24 = Existing Home Sales

Aug 25 = New Home Sales

Aug 25 = Crude Inventories

Aug 26 = Initial Unemployment Claims

Aug 27 = GDP – Second Estimate Q2

Stock market risk algorithms are awesome! Right now I’m not discussing high frequency trading or black-box trading.

The stock market risk algorithms I am talking about is utilizing a PC to choose what shares to buy and when.

Exactly why is this so great?

It altogether eliminates the aspect of feelings from your stock trading.

The algorithm tells you when to acquire and when to sell based mostly on the movements of the stock. In this particular scenario, you are reacting to what the marketplace is doing as an alternative to your own feelings, emotions, and biases. One can find a group of rules and those rules are always applied. Greed and fear are superceded by objective rules and mathematics worked out by a computer that doesn’t have any prejudice.

What I do not like are stock market risk algorithms that are kept secret or concealed from the trader. Because of this situation, investing using them results in being more an emotion of “hope” in the system than in the computational potential of the algorithm as it is applied to correctly predicting future price motion in a stock or market.

This kind of black-box algorithms are flavors of the month that appear and disappear as enough traders ultimately depart from that losing technique.

You need to always know what a computer algorithm is doing due to the fact you have to know what changes must be made to the algorithm at various times when it stops performing as expected. When you are not aware of what feature of the algorithm is faltering, how can you make the modifications needed to bring it back into line?

My favorite stock market risk algorithm employs a point system and calculates: the last hour close relative to the 5 hour moving average, any 3 day lows or highs made, the last price relative to the 20 day moving average, any 3 week lows or highs produced, any 3 month low or highs made.

The algorithm then turns into a time saving device only, which is the right arrangement to have between stock trader and algorithm. Basically, you could do the calculations for yourself but it would take much longer. You could do 10 stocks a day, or use a computer algorithm to do thousands of stocks every single day.

In this video, you will look at my favorite algorithm called Smart Scan. Employing Smart Scan, you can readily identify winning stocks, futures, precious metals, and currencies that meet one of 24 preset scanning criteria, which includes uptrends or downtrends.

As stock traders we have 3 potential positions we can take at all times: (1) We can be long the market (2) We can be short the market (3) We can be on the sidelines and out of the market.

Utilizing the Smart Scan algorithm, you can discover some of the genuine diamonds which are out there.

Making trading choices and putting your hard earned funds on conspiracy theories in the stock market is foolish.

You will find truly two levels of battiness that one should achieve in order to get their higher education degree in Stupidology: believe in the conspiracy theory, and trying to make money on the conspiracy theory in the stock market.

For these conspiracy theories stock market investors it is the very last refuge of failure before losing all their money.

Top Stupid Conspiracy Theories In the Stock Market

1. The Illuminati and One Earth Government. This one has murdered a lot of stock traders. There’s an evil group of men who want to manage the globe. These males are known as the Illuminati. These are those bastard bankers that bamboozled you into obtaining a house you couldn’t afford, and then took it back from you. They’re lazy and don’t wish to try and control many countries. Instead, they would like to make us all into one big country due to the fact it is less difficult to manage.Therefore you really should purchase banking and financial stocks since they may be the folks you desire to place your bets on for total world domination.

2. GLD is a Trojan horse clearly developed and started to use stock-investor capital to short physical gold. Thousands of traders have been cheated by this untrue conspiracy theory. Those evil bankers path for world control is paper cash. Therefore, they must short gold to push the value of their paper funds up. The thing is, gold is freedom and paper money is enslavement. That is why the Illuminati cannot stand gold. For that reason you need to purchase gold mainly because paper money has no worth now and eventually everyone is going to come to understand this. If you’re previously in gold, you ought to hang on to it even if it hasn’t gone anywhere for a year now. Ultimately the GLD short gold Illuminati will have to cover their shorts and then gold will run to $5,000 an ounce.

3. Gold and Silver are never over-priced and are thus the best investments in the world no matter how much they have already gone up. This conspiracy theory purged my boss out to the tune of $150,000. The Federal Reserve just starts printing money to pay for almost everything. Each excursion to the printing press results in the devaluation of every single dollar you’ve got in your savings. With the big bail out for the bankers, err…. I mean Illuminati, the dollar actually has no value anymore. Individuals are going to recognize this and the value of gold and silver will soar. Therefore gold is somehow a safe haven due to the fact it’s the only thing that has worth and consequently it will continually be a good investment. This is why you really should obtain gold due to the fact buying gold means preserving capital.

4. The Commodities Future Trading Commission (CFTC) is helping to help keep the price of silver low for the central bankers, errr… I mean Illuminati. In fact, the Commodities Future Trading Commission (CFTC),said that for more than 15 years it was indeed obtaining grievances from silver investors alleging the value of silver futures on Nymex had been manipulated downward. And so, for the second time in four years, the CFTC investigated. And, also for the second time in four years, it came to the conclusion that there was not any hint of manipulation. After all, its most current report says, silver futures prices had risen noticeably between 2005 and 2007 and outperformed gold, platinum and palladium. But the conspiracy stupidologists were having none of this and the new chant was that the CFTC was confidentially in on the plan to keep the price of silver low. Consequently you ought to obtain silver due to the fact these Illuminati bastards are not going to be able to maintain the price of silver this low forever.

5. Goldman Sachs conspiracy. Goldman Sachs is ran by the Illuminati and they are managing a shadow government, or something nearly as stunning. The dude who started this conspiracy is Martin A. Armstrong, a ex – commodities investor. Here was an insider coming clean about the actual truth of Goldman Sachs existence. Actually, not exactly. What these conspiracy stupidologists fail to disclose is that Martin Armstrong is now serving time in prison for scamming Japanese investors. They also discount the parts from his writings that go on to talk about an assassination plot against him in prison. Consequently you should short Goldman Sachs mainly because any day now they will be closed down by the new U.S. President.

Compliments my comrades and fellow stock trading masters. We might be at the start of another major bull rally.

I’m sorry?

How can that be with so many people being without a job, banks being closed down, and housing construction taking a double plunge to the downside?

Excellent question. It does seem ridiculous if you are a one-dimensional creature living in the here and now.

On the contrary you are greater than that. You were given this ability to visualize yourself trading in the future. This higher level of thinking is something that makes you different from other beasts and living organisms that can merely think in the present. While I confess it’s not as great as Torchwood time travel, it is capable of making you a ton of money.

One of the most difficult concepts for amateur investors to grasp is that the stock market is the future of the economy anywhere from 3 to 9 months. In other terms, all the price action happening on the stock market at present is a gambit on where we think the economy will be 9 months from now. The stock market is yelling at us that in 9 months from the present, the jobless rate will be lower, banks will no longer be failing, and home construction will go back up. The earnings season that just ended confirmed that with 69% of all companies posting earnings increases YOY.

Last weekend I wrote regarding how, with the downtrend channel breakout, we do not know what new channel or chart pattern will appear as we don’t have enough data yet. At the present with 1 week more of chart data, and zooming out on the chart to see the bigger chart pattern, a configuration jumps off the chart.

The S&P 500 has finished a Bullish Flag breakout.

Now short sellers and gold bugs will argue the Bullish Flag breakout and proclaim that not enough volume is there for this to be a applicable breakout but this is just not true. If you go back and study the previous Bullish Flag breakout we had on the S&P 500, you can see that the volume that has accompanied this breakout is over 24% greater!

The Bullish Flag did a great 38.2% Fibonacci retracement of the bull move that started in March of 2009. A 38.2% retracement is a common retracement for a uptrend.

I am upgrading the S&P 500, Nasdaq, and Dow to that of uptrend.

FTV posts a new stock market analysis video for you weekend technical analysis research warriors.

I dig how the stock market analyst for Free Trading Videos comments on Friday’s Doji and how a Doji only signals a turnaround at the time you get a corroboration day that breaks either the Doji day’s high or low depending on wherever the Doji appears.

For example, if you examine the Doji on SPX on Friday, June 25 2010, you need a break, or even better a close, above Friday’s high of 1083.56

Provided we see that early next week, FTV says we will have a higher swing low in place and it’s safe to go long with a short time frame.

I’m a bit less positive than FTV for the odds of a long swing trade setting up for us. With the weekly chart of the S&P 500 forming a Bearish Engulfing last week and the close by proximity we have to closing the Bearish Head and Shoulders Top pattern, I believe it will be too tricky to nail a big upswing stock trade for most investors.

Nevertheless this is a great stock market analysis video you should watch.

In addition here is a listing of the significant economic reports coming next week that might manipulate this market, especially Consumer Confidence that comes out on Tuesday July 29th. I bet at some future point in time Consumer Confidence is going to show a drop thanks to Republicans in Congress jamming the extension of Unemployment Benefits. Often the passage of unemployment benefits extensions has gone like this; Republicans are in opposition to the extension, then in the 11th hour the measure is passed. Not this time. This time all Republicans in the Senate and one Democrat, Ben Nelson from Nebraska, blocked a vote to continue unemployment benefits. That decision will potentially cut off benefits for 1.2 million Americans which will result in a big hit to consumer confidence among other things.

Jun 28 08:30 Personal Income
Jun 28 08:30 Personal Spending
Jun 28 08:30 PCE Prices
Jun 29 10:00 Consumer Confidence
Jun 30 09:45 Chicago PMI Jun
Jun 30 10:30 Crude Inventories
Jul 01 08:30 Continuing Claims
Jul 01 08:30 Initial Claims
Jul 01 10:00 Construction Spending
Jul 01 10:00 ISM Index Jun
Jul 01 10:00 Pending Home Sales May
Jul 01 14:00 Auto Sales Jun
Jul 01 14:00 Truck Sales Jun
Jul 02 08:30 Nonfarm Payrolls Jun
Jul 02 08:30 Unemployment Rate Jun
Jul 02 10:00 Factory Orders May

You know folks, occasionally you notice something so silly in your area of skill that you can’t merely sit on the sidelines and say nothing. You gotta shoot out of your bench from the sidelines and point your finger and declare sir, what you recently said was ridiculous.

Econbustsoon of YouTube has just posted a new technical analysis video that is, extremely, stupid.

To add a little background here, this man is a Republican who thinks Glenn Beck of Fox News is with it. I am surprised any person with an IQ over 80 watches Fox News anymore. I always feel a little more stupid after looking at Fox News. We report you decide, tongue-in-cheek, wink wink.

Therefore this is one of those guys who thinks western civilization will fail by the end of 2010 and that you should purchase gold.

I abhor when gold ingots experiment in technical analysis with a preconception not in favor of stocks. That’s intellectual deceitfulness to say the very least.

So what Econbustsoon has done that has pulled me off the sidelines and has got me pointing my figure at him and calling him lame is the method of technical analysis he uses in his video to prop up his biased Republican views.

It’s dreadful. No, it’s further than dreadful: it’s DUMB.

This technique of stock charting is NOT how you should perform technical analysis on stocks. Econbustsoon is only concerned with putting his Republican views out there with the hope of gaining converts. He is not concerned about you losing money if you take his guidance. If he was, he wouldn’t use some elementary, backwoods, make it up as I go along, system of technical analysis. You will not hit upon any trustworthy technical analysis books or websites instructing you how to photoshop a stock chart in an effort to predict where a stock market is going. He attempts to come off credible by saying “Past performance is no guarantee of future results ladies and gentlemen BUT if you are not paying attention to the symmetry of time…” and then he does his sham method.

You wonder if Republicans are getting distressed when they have to resort to photoshopping charts of stocks to make them show what they wish for.

Now and again people do or say things so dumb that it’s best to just get out of there way and let them glow in all their stupid glory so here it is.

A viewer response episode in which a viewer asks, “I bought BP last week at $37.52. I am holding long term. Good value or too much risk?”

Watch as Lance scolds a stock trader for buying BP.

In this stock market tutorial, Lance explains that going long in a stock that is in a strong downtrend is like trying to catch a falling knife. You may get lucky and really nail a trade but doing this long term, year after year, is a recipe for going broke in the stock market.

Look over Lance’s shoulder as he performs technical analysis on BP.