Econ Calendar 08:30 Jan Nonfarm Payrolls (last -85K) 08:30 Jan Unemployment Rate (last 10.

0%) 08:30 Jan Manufacturing Payrolls (last -27K) 08:30 Jan Average Hourly Earnings (last m/m 0.2%, y/y 2.2%) 15:00 Dec Consumer Credit (last -$17.5B)

Daily Trading Letter

Friday, February 5, 2010

Bounce fails, heavy selling resumes

The SPY and QQQQ closed down on the session 3.09% and 2.89% respectively. The gap down triggered the daily sell, and with no attempt by the bulls to buy the gap, it was all red the entire day. Last weeks low was pierced and the markets continued lower. Now that a lower high has been put in, the trend will likely be down for the immediate term as bulls who wait for obvious and confirmed trend reversals (re: herd) start to unwind positions. Do keep in mind that the SPY is down 7% from the highs, and bounces will come, however the 104.00 area looks like a reality for now. How fast we get there depends on the urgency of fearful bulls, but also the shorts who are underwater from levels far below. Those shorts are looking to minimize their losses.

Earnings Calendar

Before the Open: AET, AYE, AXL, AIV, BZH, BPO, BRKS, SUR, LRN, KELYA, MAG, MD, NNN, PPL, PBH, SXT, SPG, SEP, TE, TSN, VVI, WY, YRCW

Sector performance
(% change previous day):

Consumer Staples (2.33%) Telecom (-2.37%) Utilities (-2.64%) Health Care (-2.64%) Consumer Discretionary (-2.86%) Tech (-2.88%) Industrials (-3.06%) Materials (-3.84%) Energy (-3.90%) Financials (-4.15%) LARRYS CORNER

Strong trading volume, volatility spiking, dollar strength, and fear globally over sovereign debt, equals one rough trading day! ! Is it the dollar flexing its might or..worries over the euro et al ? Forget gold, emerging markets, commodities, in

the face or fear U.S. Treasuries appear to be the pile with the least amount of flies. Poor debt auctions in Portugal and Spain have spurred concerns over unhealthy debt levels. The thought here is, all these events are likely to stop the U.S. labor market from rebounding in the near-term, and lets not forget China's attempt to curb its overheated growth.

Industry Groups
(% change previous day):

Decline

Photographic Products 11.39% Steel -6.98% Industrial REITs -6.46% Electronic Manufacturing Services -6.27% Tires & Rubber -6.12% Specialized Finance 6.07% Human Resource & Employment Services -5.92% Independent Power Producers & Energy Traders -5.92% Oil & Gas Drilling -5.91% Health Care Facilities 5.80%
GREGGS CHART OF THE DAY

This is a 15min sell setup we took on RIMM yesterday. This play was a high odds trade for a bunch of different reasons, but most importantly, was because of its price action. The play itself was a short on a 4 bar rally into a declining 20ma and price resistance at 3pm reversal time in a weak market environment. It did not follow through to the downside, but the trade gave us a 50cent move to profit from. The chart itself shows a clean area of support from Wednesday in the 65.60area. Yesterday, a 60min sell (not shown) took this back down to retest that area of support. After a brief pause, in a weak market, we see a big red bar break through this area. A simple idea to always remember is when price action is finding support on an area multiple times and then breaks through that area, this very same area then becomes resistance. We see after a breakdown bar that the next rally into this area leaves a topping tail, confirming this area now as resistance. This was our primary signal telling us the odds were in our favor. Keep trading simple. We dont need hundreds of indicators or lines all over the charts to give us direction. Just watch the price action and listen to what its telling you.
DYLANS DAILY DOSE

Scanning becomes tough with such wild swings in the indices. I see many charts that all looks like the SPY and Qs...red break down bars trying to find support. With this kind of price action, almost everything gets swept with the broader markets, and the daily timeframe becomes too large. I will be focusing on the SPY Friday and any individual story stocks moving on their own. I believe RL hits 72.00 sooner or later. Big gap

down and consolidating near the low. Ill be looking for a break of 76.90 for continued weakness. If it bases at these levels, it will be even better when it eventually triggers.

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