Keep A Watchful Eye
On
a double-witching Friday and in the midst of more warnings
from automobile giant Ford Motors (F),
we are now ready for something to pull this market through. It was
suppose to be an easy week as we head into the Fed meeting
next Tuesday.
Volume picked up yesterday
just shy of the 50 day average,
giving hope that we would have had a follow–through
day, only to get six-packed in today’s session to close lower for the
week. Fortunately for us volume was low for the session.
So what should we do? Well
for one,
continue to monitor the dollar verses other foreign currencies. The
Euro is showing some strength and which if it should continue will put
some pressure on the European Central Bank to reflate.
Japan must curb the ascent
of the Yen, especially since the Japanese economy is in such poor
shape the last thing they need is a strong Yen.
Okay now that we got the
economics out of the way, we should still remain defensive. I noticed
an interesting scenario panning out while looking at the ETF’s. Notice
how the Russell 2000 Value index has performed (IWN)
verses the Nasdaq 100 Tracker (QQQ).
What does this mean to me?
It means that with the current market conditions we should look for
some potential trading candidates in the Small Cap Value market. Just
some observations I wanted to share with you. Especially since the
Russell 2000 Value index has rose 36% since April.
Now ironically, in this
commentary unbeknownst to me I provided a number of stocks in the
Russell 2000 value index, the most recent was Hudson River
Bancorp (HRBT)
which broke out two days ago and Downey Financial (DSL).
Action Performance (ACTN)
can be found in the value index. The company has shown some improving
earnings growth over the past three quarters (120%, 164% and 133%).
ACTN is forming an ascending symmetrical triangle. Volatility is
dropping off a bit, but not to any extreme.
Remember that all securities
are risky. In any trade, you should always reduce your risk by
adjusting position size and placing open protective stops where
you will sell your long or cover your short in case the market turns
against you. For an introduction to combining price stops with
position sizing, see Loren’s lesson, Risky
Business.
Have a great
weekend!
Greg