Triangle....

In case you have been visiting various T/A sites lately or have been paying attention to some of the CNBC commentators, you'd often hear the mention of "breaking out of triangle"!    What they are referring to is the exact same thing we have been talking for the last few days.  Basically, market participants, especially the ones heavily into T/A , are looking for a big move that would take us out of this trading range.  This infatuation has really been led by the Shorts to scare.   This trading range has basically been teasing us with some false moves left and right.     Today's no exception.    What started as a happy camper for bears kind of day only ended up as a "do I need to worry about my short position" at the end of the day.  The rush to cover positions would result in some fast and furious moves once these triangles get busted. 

This market has a particular way to mess with your minds lately.    What may seem like a logical outcome may actually turn out to be something else.   This is what we attempted to say in the Journal leading into today's action as everything pointed to a breakdown.   Today's CPI data was not good, and that's a fact.    The last thing we need at this moment is more inflation worry and that'll definitely hamper any recovery from a potential recession.    Also, the details of the last Fed. meeting was released today and we now have the actually acknowledgement of the Bernanke and company that growth rate will be slowed down this year.     So how are all these news not pushing this market down?    Don't ask why! .   It's just happening as we pointed out the possibility this weekend and that's all we need to know. "...However, we may get some surprises judging from the futures trading at the current moment that coincides nicely with Fridays reversal led by financials after a BBY warning and weaker NY Empire number, Michigan sentiment.  Is the market starting to price in some of the bad Eco data?.  Well, we'll definitely know after this weeks data. "       

Today action was some reinforcement.

Today, the bears seemed to have all the right cards and there was no reason not to think that things won't go their merry way.     However, as we all have known before, market has its own mind when it comes to timing of a break down.     In our opinion, in light of the recent economic news and a seasonal slower trading environment coming up, the market will eventually come down and at least test the recent low.     When will it happen?    We now have a feeling that we may be due for a big upward move before it gets rolled over.      We also have a feeling that many participants who are bearish on this market are actually scared that we'd have a big short term rally.       Then there's this triangle talk.    As the trading range is tightening up, the urgency to have a move has become far greater.    We feel the big move is going to happen very soon and this time around, you may not want to fade this move right away as the move can probably carry a few days worth of momentum at least.

The most efficient trading strategy during the past few weeks is to fade the move.   It means you go the opposite of a strong move and it takes a day or two before you get paid off handsomely.    If we are anticipating a big move that's likely to carry more than a few day's worth of momentum, you may not want to fade it as soon as possible.    Rather, you may simply want to trade with the move.     Of course, we aren't specifically calling for a direction here but merely pointing out the probability is much better now.

If we do start to get a move up, the most obvious sign we are looking for is from the XLF, or the financial sector to join in.     Financials led us to a 1000 point move from 11700 to 12780 and we feel it'll once again be the key to a potential rally.    If we get some nasty deteriorating action from the financials, then you'd know which direction this market is heading.

Commodities, believe it or not, the reason why this market isn't going down as many would suggest is the fact commodity groups are pulling it up.   We have everything from oil, coal, steel, gold, metals, fertilizers, food...and just about everything related to them having a lot of strength last couple of days.    Forget about AAPL RIMM BIDU, we have to expand our trading circle and know better about the MTL CLF(eps tomorrow) and even the PBR FDG POT MOS etc., we've traded before.     If global inflation is as real as analysts suggest, we better replace more of the plays on our watchlist.    Can this be a commodity year?    For many commodities, we are already into the unchartered territory so it's definitely plausible at this moment.

Now some plays....

Agri/Chem.,   love them or hate them!    You have to love them this week because they just don't seem to want to stop, regardless of this market's direction.   We hate them because it hasn't presented us with any good buying opportunity last few days.    POT MOS CF all notched new closing highs today. 

Steels/Iron Ore,  apparently the deal over the weekend was that some Asian companies agreed to iron ore price hike.   This explains a lot of upward movement from this sector.    We are liking many old yet familiar names in this sector including MTL CLF X GGB etc.

Solars,  again, the kind of eps/outlook reported by FSLR does not necessarily get shared by other solar companies.    We again witnessed a mighty miss from STP and it's having a pretty dramatic effect on other plays in the sector.    We were picking up some FSLR earlier today around $205 alert time and are comfortable swinging/ holding some for next couple of days.

Recent EPS winners, we are keeping our eyes on some of the companies that had strong reaction to their recent earning report.   We were buying pieces and/or eyeing FLS CLB JLL MA AXE ILMN CMP... for some good action provided this market breaks out to the upside.  Take the time to review this earnings seasons Journals to see if something is missing from your watchlist.  It's been a tough go this season, but most names here have performed well since being introduced and should continue too after surviving all this.

Bottom line, we aren't leaning too heavily in either direction just yet, but based on the way this market shakes off bad news lately, the momentum seems to be shifting toward up and not down.   It could be this week, if no news bomb comes across.... Just be ready