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Short Form Buffalo Trader Bullish Reversal Report 10/19/2010

For the time being, this will be the new format, showing only the basic U.S. stock index momentum, the bullish reversals in ETFs and bullish reversals in stocks. I will periodically comment on major issues at critical times, but during the time I am attempting to build the algorithm required to download signals from almost 1300 stocks that I have built models for using NeuroShell Day Trader Professional, this is what I will leave you with. Most who have commented (and I have received, thankfully lots of comments with great appreciation to readers) want to see the reversals and not necessarily trade signals I generate. That makes life simpler for me, though at some point I will discuss methodology for building your own models. For now, I will present the data with little commentary. I will always respond to readers’ comments. This blog will steadily evolve as the time I have and the technology I use evolves. Thanks for your patience during this transition.

For 10/19/2010:

                                     $INDU      $SPX         $COMPQ     $RUT

Monthly Momentum   Pos            Pos              Pos              Pos

Weekly Momentum     Pos (OB)   Pos (OB)   Pos (OB)     Pos (OB)

Daily Momentum        Neg (OB)   Neg          Pos (OB)       Neg

N means neutral, Neg means negative, Pos means positive (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.

Index and ETF I-shares Bullish Reversals (Note: to look up quotes for the Dow Indexes (starting with DJ or DW, add a dollar sign. No dollar sign is required for the ETFs beginning with other letters.) Today’s list includes only those ETFs with a 50-day moving average of daily volume greater than 100,000 shares:

Company Symbol Exch. Industry Sector
PwrShs DWATech PDP xN ETFs (US\MidCap) ETFs
ProShrsUlShtTch REW xA ETFs (Short) ETFs
ProShrsUlShtQQQ QID xN ETFs (Short) ETFs

 

The stocks listed below are ranked by pattern bullish reversals based on a momentum indicator. Each stock by sector is listed with the cheapest stocks on a near-free-cash-flow value/price basis at the top, and more expensive stocks on that basis farther down each sector list (they are listed alphabetically):

 

 Company Symbol Exch. Industry Sector
Commercl Mtls CMC xN Metal Prds (Pipe\Fab\Misc) Metal Products
HealthSouth HLS xN Healthcare (Outpnt\HmCare) Healthcare
Universal Tech UTI xN Business Svc (Schools) Business Svc
Arthrocare ARTC P Healthcare (Products) Healthcare
Pharma ProdDev PPDI xO Healthcare (Med\Den Suply) Healthcare
Broadridge Finl BR xN Business Svc (Misc) Business Svc
Alkermes Inc ALKS xO Drug (Biomedical\Genetic) Drug
Accretive Hlth AH N Business Svc (Misc) Business Svc

 

Stocks that almost passed the neural net screens but just missed: None

Note:  U.S. equity markets continue to be extended, and yesterday after hours many tech leaders felt the pain of either disappointing cash flows (VMW), or just profit taking (IBM). The continuing point is that tech is divergent from the rest of the market and probably needs to take a rest. Most of the bullish reversals (and there were not many) were in healthcare, healthcare services, or education.

I hate to be repetitive, but a good multiday selloff would not hurt this market, and should be a boon to swing traders assuming institutional volume stays up.  Even some tech names might offer up new buy points in such a scenario. That is why I remain patient for my set-ups to show up. When they do, they are reasonably likely to make money, as GTIV recently did.

UTI is marginally favored as a long entry with tradable statistics over the next few days. Again, we need to watch action closely as the market is extended, but the model favors it with nearly a decade of trading experience within the model.

Just stay focused and keep your capital ready for the opportunities when they arrive.

Take care,

DBB

{ 2 comments… add one }

  • chris dress October 19, 2010, 1:15 pm

    David:

    What are your short and medium term thoughts on the usd?

    Thanxs

    Chris

  • admin October 20, 2010, 8:06 am

    Chris:

    My analysis of where the short to intermediate term direction of the USD (at least versus the Euro) is for it to strengthen a bit, as patterns are beginning to show that. That could have some near-term negative effects on U.S. stocks, particularly with large cap indexes ($INDU, $SPX) as export sales will be hurt overseas as it makes our exports more expensive. Many of these patterns may get skewed as every nation on earth trying to cheapen their currencies to improve exports, but for now, that is what I see.

    In the medium term, I could see a lot of volatility in both directions, up and down, simply because of all the trade and sovereign debt issues that exist in all the developed economies. It is truly a mess until some adults get in the room and start cutting spending and resolve the entitlement issues. It seems Germany and a lot of Europe are finally figuring it out. The U.S. needs to catch up quickly or the dollar will over time continue to weaken and be subject to the whims of foreign governments’ and markets’ policy decisions.

    A quick discussion of the very short run position of the EURUSD is shown here:

    http://thebuffalotrader.com/blog/?p=1532

    I am going my best to add more forex coverage in my blog. My plate has been quite full on several projects recently.

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