Free Swing Trading and Day Trading Picks & Education

MEMC Electronic Materials (WFR) is forming a rather bullish reversal pattern that can serve as an educational example of how a Rounded Reversal forms, how the “Cradle” sets up, and how a multi-swing positive momentum divergence forms.  Let’s see them.

A higher timeframe chart will show WFR resembles Crude Oil (and USO) in terms of its decline and then multi-swing positive momentum divergence that began back in October 2008.  One divergence can be a signal that the next retracement might be larger than expected - a multi-swing divergence can frequently precede a trend reversal.

A consolidation triangle formed all through 2009, and price has broken strongly to the upside out of the triangle on a volume surge last week.  Momentum (3/10 Oscillator) also broke out of its own triangle consolidation, hinting that higher prices are yet to come.

After the divergences and triangle formed, the recent price action in March allowed price to break out gently above the 20 and 50 day EMAs, and eventually the “Cradle Trade” (my favorite) formed which occurs when the 20 EMA crosses above the 50 EMA at a specific point, and price comes back down to test that point.  The Cradle is great because it often precedes trend reversals and if the reversal fails to materialize, you can place a tight stop beneath the confluence level and so your risk is low to ‘find out if the cradle will hold.’

I really wanted to show this chart for educational purposes, as it shows a good example of the following concepts:

Multi-Swing Positive Momentum Divergence
Triangle Consolidation (and break-out on high volume)
“Rounded Reversal” (in price)
Cradle Trade

See if you can find additional lessons in WFR’s price structure.

Corey Rosenbloom
Afraid to Trade.com

Some Potential Swing Trading Opportunities for today...

These stocks will be monitored by you every day!!! Follow the master plan and you will be on your way to learn to trade stocks like a PRO... enjoy...

The results are generated by my stock scanner. Only the first 5 results are displayed here for every scan.

For full results, subscribe now to StockScanPRO for 30 days FREE, then only pay $9.99 a month!.

SECRETS TO GREAT RESULTS:
CONFIDENCE - PATIENCE- FOCUS - DISCIPLINE

Long Swings

Window

Scan Code From www.StockScanPRO.com:
(sma(volume,20) >= 500000) and (close() > 7) and (adx(10) > 30) and (pdi(10) > mdi(10)) and (high() < sma(close,5))

Results for AMEX

Results for NYSE

Results for NASDAQ

Swings

Scan Code From www.StockScanPRO.com:
(sma(volume,20) >= 500000) and (close() > 12) and (force_index(3) <= 0) and (force_index(13) >= 0) and (adx(10) > 30) and (high() < high()[-1]) and (high()[-1] < high()[-2]) and (close() > sma(close,10)) and (close() > sma(close,20))

Results for AMEX

Results for NYSE

Results for NASDAQ

1-2-3-4

Scan Code From www.StockScanPRO.com:
(sma(volume,20) >= 500000) and (close() > 12) and ((adx(10) + adx(20))/2 > 30) and (pdi(10)+pdi(20) > mdi(10) + mdi(20)) and (low() < low()[-1]) and (low()[-1] < low()[-2]) and (high() < high()[-1]) and (high()[-1] < high()[-2])

Results for AMEX

Results for NYSE

Results for NASDAQ

Cross

Scan Code From www.StockScanPRO.com:
(sma(volume,20)>=500000)and(close() > 12)and(sma(close,5)>sma(close,15))and(close() < sma(close,5))and(close() > sma(close,15))and(high() < high()[-1])and(close() > open())

Results for AMEX

Results for NYSE

Results for NASDAQ

Triangle

Scan Code From www.StockScanPRO.com:
(sma(volume,20) >= 500000) and (close() > 12) and (close() > sma(close,20)) and (high()[-2] > high()[-1]) and (high()[-2] > high()) and (low()[-2] < low()[-1]) and (low()[-2] < low()) and (high()[-1] > high()) and (low()[-1] < low())

Results for AMEX

Results for NYSE

Results for NASDAQ

Reverse

Scan Code From www.StockScanPRO.com:
(sma(volume,20)>=500000)and(close() > 12)and(high()[-2] > high()[-1])and(high()[-1] > high())and(low()[-2] > low()[-1])and(low()[-1] > low())and(close()[-2] <= open()[-2])and(close()[-1] <= open()[-1])and(close() >= open())and(volume() > 1.5 * sma(volume,20))

Results for AMEX

Results for NYSE

Results for NASDAQ

Breakouts

Scan Code From www.StockScanPRO.com:
(sma(volume,20) > 200000)and(close() > 7)and(high() >= max(high,40))and(high()[-1] >= max(high,40)[-1])and(volume() > 1.5 * sma(volume,20))and(close() > open())and(volume()[-1] < sma(volume,20))and( (close() - low()) >= (0.75 *(high() - low())) )

Results for AMEX

Results for NYSE

Results for NASDAQ

Revival

Scan Code From www.StockScanPRO.com:
(sma(volume,20)>=500000) and (close() > 12) and (close()[-1] - low()[-1] <= 0.1 *(high()[-1] - low()[-1])) and (close() - low() >= 0.95 *(high() - low())) and (close() > sma(close,15)) and (close() > sma(close,50))

Results for AMEX

Results for NYSE

Results for NASDAQ

Reversals

Scan Code From www.StockScanPRO.com:
(sma(volume,20) >= 200000) and (close() > 12) and (low() <= min(low,40)[-1]) and (volume() > 2*sma(volume,20)) and (close() > open())

Results for AMEX

Results for NYSE

Results for NASDAQ

Short Swings

Cross

Scan Code From www.StockScanPRO.com:
(sma(volume,20)>=500000) and (close() > 12) and (sma(close,5) sma(close,5)) and (close() < sma(close,15)) and (low() > low()[-1]) and (close() < open())

Results for AMEX

Results for NYSE

Results for NASDAQ

1-2-3-4

Scan Code From www.StockScanPRO.com:
(sma(volume,20) >= 500000) and (close() > 12) and ((adx(10) + adx(20))/2 > 30) and (pdi(10) + pdi(20) < mdi(10) + mdi(20)) and (low() > low()[-1]) and (low()[-1] > low()[-2]) and (high() > high()[-1]) and (high()[-1] > high()[-2])

Results for AMEX

Results for NYSE

Results for NASDAQ

Swings

Scan Code From www.StockScanPRO.com:
(sma(volume,20) >= 500000) and (close() > 12) and (force_index(3) >= 0) and (force_index(13) <= 0) and (adx(10) > 30) and (low() > low()[-1]) and (low()[-1] > low()[-2]) and (close() < sma(close,10)) and (close() < sma(close,20))

Results for AMEX

Results for NYSE

Results for NASDAQ

Window

Scan Code From www.StockScanPRO.com:
(sma(volume,20) >= 500000) and (close() > 7) and (adx(10) > 30) and (pdi(10) < mdi(10)) and (low() > sma(close,5))

Results for AMEX

Results for NYSE

Results for NASDAQ

Revival

Scan Code From www.StockScanPRO.com:
(sma(volume,20) >= 500000) and (close() > 12) and (close()[-1] - low()[-1] >= 0.9 *(high()[-1] - low()[-1])) and (close() - low() <= 0.1*(high()-low())) and (close() < sma(close,15)) and (close() < sma(close,50))

Results for AMEX

Results for NYSE

Results for NASDAQ

Reverse

Scan Code From www.StockScanPRO.com:
(sma(volume,20) >= 500000) and (close() > 12) and (high()[-2] < high()[-1]) and (high()[-1] < high()) and (low()[-2] < low()[-1]) and (low()[-1] < low()) and (close()[-2] >= open()[-2]) and (close()[-1] >= open()[-1]) and (close() <= open()) and (volume() > 1.5*sma(volume,20))

Results for AMEX

Results for NYSE

Results for NASDAQ

Triangle

Scan Code From www.StockScanPRO.com:
(sma(volume,20) >= 500000) and (close() > 12) and (close() < sma(close,20)) and (high()[-2] > high()[-1]) and (high()[-2] > high()) and (low()[-2] < low()[-1]) and (low()[-2] < low()) and (high()[-1] > high()) and (low()[-1] < low())

Results for AMEX

Results for NYSE

Results for NASDAQ

Breakdowns

Scan Code From www.StockScanPRO.com:
(sma(volume,20) >= 200000) and (close() > 7) and (low() <= min(low,40)) and (low()[-1] <= min(low,40)[-1]) and (volume() > 2*sma(volume,20)) and (close() < open()) and (volume()[-1] < sma(volume,20)) and (close()-low() <= 0.25*(high()-low()))

Results for AMEX

Results for NYSE

Results for NASDAQ

Reversals

Scan Code From www.StockScanPRO.com:
(sma(volume,20) >= 200000) and (close() > 12) and (high() >= max(high,40)[-1]) and (volume() > 2*sma(volume,20)) and (close() < open())

Results for AMEX

Results for NYSE

Results for NASDAQ

While the Nasdaq 100 tech rally completed its 11th day, the rise has failed to produce many new highs.  There were 8 new highs and 20 new lows in my universe of 4,000 stocks on Wednesday.  71% of the NYSE stocks closed above their 40 day averages, reflecting the strong  but not severely overbought reading in the T2108 indicator.

Four of the 8 stocks at new highs are on my IBD100 lists:  SNDA, MNRO, AZO and ROH.  MNRO has a strong chart, rising on large volume.  Both AZO and MNRO are in the auto parts/repair business.  During a recession, people keep their old cars longer and must eventually repair them.

I remain cautious and largely in cash.  I maintain small long positions in QLD (the ultra long QQQQ ETF), AMZN, NFLX, AAPL and GMCR.  My sons tell me the new iphone release this summer will be extraordinary.  This anticipated  development may be why AAPL is holding up pretty well lately.

• gmi: 3
• gmi-r: 6
• t2108: 71

In the wonderful movie Master and Commander, Russell Crowe's character sees that the Acheron, the enemy ship, has managed to sneak up on him yet again. "This is the second time he has done this. There will not be a third."

I decided the same thing about /ES earlier this evening. Although I was short, I was quite concerned about the strength I was witnessing when the /ES was up 4.50 points. I reversed the position (purchase price=814), and I also bought into 25 /NQ at 1256.89.

The pullback from last week's strength was short-lived, and with a general target of about 1050 on the S&P, I need to be more bold with my /ES (and /NQ) long positions. The first couple of times I've gone long I only took a couple of points. That needs to end. I need to take a bigger piece out of the move, which means wider stops and more patience.

Both positions have, just in the past couple of hours, moved nicely into the green. I think I'll do a post tomorrow on why I'm feeling more comfortable in my bull suit these days. It's an important topic.

Hey, here's my tip for my fellow bloggers out there - - if you ever want to bring out the freaks and lead them to your inbox, just do an April Fool's Post. God almighty in Heaven. What a day. You wouldn't believe some of the emails I got.

Anyway.

The market's weakness has, so far, been a two-day wonder. I've been tilting to more bullish positions (particularly commodities and energies) just in case the bulls kick things into high gear again.

I know all eyes are focused on the whole Mark To Market thing (which reminds me - - my house is worth $20 million. And my blog? Twice that much). This could be yet another instance of Buy the Rumor, Sell the News. It would be kind of a kick if the banks got the FASB to let them lie their way to profitability, just as they are demanding, and then we saw banks tumble (and FAZ soar). Just a thought.

Some bloggers just do one medium sized post at the end of the day, whereas I seem to be in a mode where I bombard you with little posts all through the market hours and am burned-out by day's end. So that's kind of where I'm at right now. I'll write more later if anything meaningful pops in my head. Rest assured, it won't be another gag.

Tomorrow the European Central Bank is expected to take interest rates to a record low of 1.00 percent. The size of their rate cut as well as the possibility of the central bank adopting “unconventional measures” should weigh heavily on the EUR/USD going into the rate decision. With the Eurozone economy deteriorating by the minute, even the traditionally stubborn ECB President Trichet may have to relent to doing more than simply reducing interest rates.

There are many different ways that the ECB rate decision could play out. Beyond cutting interest rates by 50bp, Trichet can either talk about unconventional measures vaguely or specifically. The more specific he is, the more bearish it will be for the EUR/USD. The more vague he is about alternative measures, the less bearish it will be for the EUR/USD. If he doesn’t mention it at all, then the EUR/USD could rally despite a half point rate cut.

The European Central Bank is in a difficult position. Unlike other central banks, there is no “Euro-bond” to purchase. Furthermore, according to current mandates, the ECB is prohibited from purchasing Government securities from individual nations within the Euro-zone. It is possible however for these laws to be removed, but that creates a whole new set of problems as the question then becomes more political as to which government bonds should they purchase. The fragmented nature of the Euro-zone would make it very difficult for the ECB to begin a definite purchasing plan based on the various credit ratings the countries offer. Inevitably, the brunt of neglect would be troublesome and threaten the EMU structure. In order to avoid these inherent complications, the ECB will probably opt for alternative measures which may include but are not be limited to the following:

1. Purchase International Debt
2. Create a Eurobond
3. Buy Corporate Shares
4. Buy Mortgage Debt
5. Extend the maturity of Repo Purchases
6. Exend Availability of Liquidity
7. Use Reverse Auction to Purchase Government Debt

Quantitative Easing has been a rocky road for many countries and is even more complicated for the ECB than for the Fed, BoE, or BoJ. However Trichet is running out of options and if he doesn’t act now, he could risk an even deeper recession.

EURUSD  has a strong bullish edge and rallies 8 out of 10 times, with the strongest edge coming in 3 days when the following is true:

It was up one day ago, down big three three days ago and down on the most recent day, and the S&P was up four days ago, up one day ago, and up on the most recent day, and Bonds were up one day ago, and up on the most recent day

Target is 1.3375

Earlier, I took a look at “Dow Jones Similarities Between Dow Jones 1937/1938 and Today” and then followed up with “The Resolution of the 1937 Bear Market,” both of which were high-traffic posts.  Let’s take a special look now at the Elliott Wave structure as more price bars have developed since that report and the structure is still as eerily similar now as it was then.

Dow Jones 1937 -1938 with 5-Wave Structure:

One could have interpreted the final wave structure such that an “ABC” Wave 4 actually completed at the beginning of 1938 (meaning, replace “A” with a circled “4″) and then one might have an even more similar structure that’s playing out in today’s market - in that many analysts (myself included) were (maybe still are) expecting a final test of the March lows to mark a Five-Wave fractal pattern.

We see that in 1938, those expecting a final push to ‘double bottom’ or test the lows were disappointed, as price managed to retrace to the falling 20 EMA (off of a positive momentum divergence) and then form only half a test of the lows at 100 before marking the ‘bottom.’  We know from the “resolution” post that this was not the actual bottom of the bear market (it occurred in 1942) but this structure preceded a 62% price rally off the lows at circled Wave 5.

Let’s see how Today’s structure resembles that of yesteryear.  I gave you a few more weeks to examine on the 1938 chart.  If I froze the chart exactly similar to today, I would have done so at the Doji at the 120 level which came up into the falling 20 week EMA in April 1938 (how ironic).

Dow Jones 2007 - 2009 with (possible) 5-Wave Structure:

A major takeaway is to watch very closely for a positive break above the falling 20 week EMA to assure us that any rally has legs.  We’re seeing a very same oscillator and moving average structure, combined with the broader Elliott Wave structure.

IF the structures do wind up being more similar (and that is a big ‘if,’) then we could expect a weak downswing that may take us to the 7,000 level, but price would find support there before testing lows, and we could even get a continuation of this swing.  There’s no certainty or guarantees in either direction, but sometimes it can be helpful (if only to give reference) to look at what’s happened before to see what has potential odds of happening again.

For now, I continue to be amazed at how similar this Bear Market (price-wise on the Dow Jones) appears to the last major Bear Market.  The implication is that 6,500 may mark an intermediate low that could hold for a few years and give us a decent rally… but it might not be the absolute low.

Corey Rosenbloom
Afraid to Trade.com

For each of the past 3 months, non-farm payrolls has fallen by more than -650k. In December, payrolls dropped 681k, which at that time was the biggest single month contraction in job growth since 1945. Based upon the ADP employment report, the Challenger layoffs report and weekly jobless claims, traders should brace for an even sharper decline in March payrolls.

Private sector employment fell by 742k this month and the scary thing is that ADP historically underestimates payrolls. According to Challenger, layoffs rose 180.7 percent while weekly jobless claims exceeded 650k three out of the past four weeks. The only silver lining would have to come from the public sector, but there is little chance that the increase in government jobs would be more than 10k or 20k.

This time around, we do not have the luxury of using the employment report of service sector ISM as a leading indicator for NFPs, but everything else points to the biggest contraction in the labor market in more than 6 decades.

If payrolls fall by more than 700k, the dollar could actually rally because the dollar is trading on risk appetite and not economic data. I will be publishing a Non-Farm Payroll Preview tomorrow on FX360.com

As the American consumer weakens, and in my estimation - shall remain weak for an extended duration - we put the spotlight on the Automotive Replacement & Accessories sector a few months back [Jan 15, 2009: Thesis - Automotive Replacement and Accessories] Since then, all four names we mentioned in the piece, even the major laggard of the group have surged despite a very bad January and February for the market.

Autozone (AZO)

O'Reilly Automotive (ORLY)

Advanced Auto Parts (AAP)

...even lowly Pep Boys (PBY)

Worst quarter since the 1930s? Not in some quarters. I'm posting some more stories from the press now that the mainstream investing media is catching on... keep in the mind, these are counter cyclical plays and if you are of mind the economy will be recovering "soon" or we'll be back to normal "by the 2nd half of 2009" or even early 2010, these stocks will fall out of favor. I am not of that mind and believe a consumer facing ever higher unemployment, wage pressure, and ever higher living costs will continue to focus on keeping up what they have instead of flipping into a new car every 3-4 years like the "good ole days". Which leads to me to another thesis which I'll present in the coming days.

One other "risk" might be the government's push to do everything in their power to make you buy new cars - there is now a lot of talk about mimicking the German plan to subsidize new cars in return for turning in clunkers [Mar 3, 2009: German Auto Sales Boom to 10 Year High Due to Government Scrap Bonus] I think that will help new car makers on the margin, but as a whole the U.S. savings rate has been nowhere near the Germans the past decade so without the house ATM (which the government is also trying to reignite) new car sales will be depressed for quite a while. Remember, Americans were resorting to 6, 7 and indeed even 8 year car loans (mini mortgages) even WITH the house ATM at the peak on insanity a few years back. [Feb 13, 2008: Car Loans Being Stretched to 7 Years] [September 2007: Is a 10 Year Car Mortgage Far Off?]

The first piece is from Investors Business Daily and is specific to our holding in O'Reilly Automotive - again with this name there is more uncertainty with the near term due to a large integration but some very nice long term synergies. Along with Autozone they have top notch management.

• Americans have cut back sharply on new auto purchases. But that only means they're driving their old cars longer. And that translates into more sales of batteries, fuel pumps and other replacement parts sold by O'Reilly Automotive.
• O'Reilly (NasdaqGS:ORLY) now trails only AutoZone (NYSE:AZO) and Advance Auto Parts (NYSE:AAP) as a retail source of aftermarket parts. In the wake of its purchase of CSK Auto last year, O'Reilly now has more than 3,200 stores in 38 states. Strong in the Midwest and Southeast, it now has presence in the West Coast, too. It is also creeping northward along the Atlantic seaboard.
• In the fourth quarter of 2008, O'Reilly had sales of $1.1 billion. That's 85% better than the year before, mostly the result of the added business from CSK, which operates under the names of Checker Auto Parts, Schuck's Auto Supply, Kragen Auto Parts and Murray's Discount Auto Stores.
• But O'Reilly also managed to grow sales at its existing stores by 6%, a strong showing for any retailer in the current slump. And it has been able to move in on acquired stores and very quickly improve their performance. Sales at CSK stores were actually up for the first time since the third quarter of 2005. Earnings, affected by several charges, slipped somewhat. But CEO Greg Henslee expects earnings to grow to $1.83 to $1.87 a share this year, up from $1.65 last year.
• The O'Reilly story is one of superb execution, abetted by favorable macro trends. As consumers shun new car showrooms, they must keep up their old vehicles. The average car is now almost 10 years old, notes Tony Cristello, an analyst with BB&T Capital Markets. "As that age climbs, you start to see a higher failure rate of critical parts," said Cristello.
• And surveys of auto owners by Stifel Nicolaus show that more drivers are now working on their own cars. In the spring of 2007, reports Stifel Nicolaus analyst David Schick, 5% to 6% of surveyed motorists expressed an intention to work on their own cars. But this year, 9% expect to get their hands dirty.
• O'Reilly benefits from its sales of parts to both individuals and garages, In 2008, 900 auto dealerships closed. This year, he expects 2,000 to 4,000 to shutter. This drives business to the independent service stations that are often O'Reilly customers. "If I can't go to a dealer, I will go to an independent," explained Cristello. And owners of older cars are already more likely to take their cars to independent garages than to dealers. [Oct 1, 2008: Reuters - 1 in 5 Auto Dealers Could Go Under in 2009]
  says William Blair analyst Jack Murphy. This strategy is helping O'Reilly gain market share. Especially now, adds Cristello.
• One more developing trend is helping O'Reilly. As oil prices soared in 2007 and much of last year, motorists cut back on mileage. In December, though, there were signs that motorists, likely encouraged by lower fuel prices, were returning to the road. Old cars driven more miles play right into the hands of part sellers like O'Reilly.
• O'Reilly is also maximizing their impact with deft execution. A prime example is the way O'Reilly has improved performance at the acquired CSK stores. "They're applying their seasoned knowledge of the business to a chain that wasn't spitting out optimal results," said Schick.
• Many of the CSK stores, says Cristello, were "underinventoried and had a poor mix of inventory." Because of constraints on working capital, these outlets often didn't have the parts customers wanted. Some stocked items like safes and blenders -- not top priorities for the desperate motorist whose water pump just bought the farm. CSK also lacked a private-label, entry-level product line, Cristello adds. O'Reilly puts heavy emphasis on having the right parts. "If I have that part any time a customer calls, I'll become the first store the customer will call," Cristello said.
• And O'Reilly tries to understand the markets it serves. "They have a good understanding of what parts are needed in a particular market," said Schick. To gain that understanding, O'Reilly may study vehicle registration data in the vicinity of a specific store site. That way it can determine the mix of cars and SUVs, or the popularity of Hondas vs. Chevys.
• O'Reilly also moved to lower prices at acquired stores. "CSK was simply not competitively priced," CEO Henslee told analysts on a Feb. 19 conference call. Price cuts vary by store, but overall were 2% to 4%.
• By mid-February, O'Reilly had worked its magic on 96 of the CSK stores. Henslee expects 185 store conversions will be done by May's end. Results improve almost at once, says Henslee. Old stores that had been ringing up shrinking sales volumes turn positive after three or four weeks. By their 14th post-conversion week, the stores were showing year-over-year sales gains of 16.4%. In their 15th week, they were showing gains of 17.3%. (wow)

• She wants a new car, but Pamela Davies is still driving the very first one she purchased. Even with 81,000 miles on her 2001 Toyota RAV4, the stay-at-home mother of two young children isn't ready to give it up. Her husband's 1999 Corolla, with 136,000 miles on it, is fine for now, too.
• Davies said her family could afford a new car, but the two they have are fully paid for. She and her husband would rather not take on a monthly car payment as they save for college and retirement. The recession has forced the Davies and many other Americans to rethink their spending habits. One result: They're making their old cars last longer.
• Consumers are starting to see vehicles as long-term investments, said Trevor Traina, founder and chairman of the car ownership Web site DriverSide.com. Automakers for the most part have stopped offering leases, which allowed people to drive a new vehicle for $200 or $300 a month and repeat the cycle every few years. People are taking better care of their old wheels instead.
• Car owners like Davies are one reason auto parts stores such as AutoZone Inc., Advance Auto Parts Inc. and O'Reilly Automotive Inc. have seen rising sales. They're also one reason the new car market is in the tank. "The desire to own a car for two to three years is dead," Traina said. "It's like people have woken up from some kind of consumer dream of flipping a car the way you change clothes."
• Deutsche Bank Securities analyst Rod Lache estimates that U.S. auto sales for March will decline 43 percent from a year ago to a seasonally adjusted annual sales rate of 8.6 million vehicles. Wachovia Capital Markets analyst Richard Kwas forecast a March annualized rate of 9 million vehicles, just under February's rate of 9.1 million. J.D. Power is predicting an annualized rate of 9.2 million for March. That would be lowest figure since Ward's Automotive Group began tracking monthly sales data in 1980. There were 16.1 million vehicles sold in 2007.

• After a tough 2008, the aftermarket parts industry is set to benefit from pent-up demand and recent declines in new car sales. Since demand for replacement parts and maintenance tools stems primarily from necessity, rather than discretionary purchases, we think the industry's long-term growth prospects are bright. Additionally, the industry remains highly fragmented, with national retailers representing less than 20% of the entire market. We believe this leaves national retailers plenty of opportunities to capture market share from independent retailers.
• In our view, AutoZone (NYSE:AZO), Advance Auto Parts (NYSE:AAP), and O'Reilly Automotive (NasdaqGS:ORLY) are in the best position to benefit from these favorable industry dynamics, thanks to scale advantages and superior distribution capabilities.
• Although these companies generate the majority of their sales from the automotive parts retail business, they have been expanding aggressively into the faster-growing commercial market, which sells automotive parts to professional installers and repair garages. We believe these national retailers could leverage their expansive store network by adding the commercial program to existing stores, which should help boost returns on invested capital. Furthermore, demand in the professional segment is more resilient to economic swings as it is less reliant on consumer spending patterns. The commercial business stands to gain from favorable tail winds as independent garages may benefit from incremental business due to the closures of automotive dealerships.

March was kind to the broad asset classes, and not a moment too soon. After February's across-the-board declines, and virtually the same in January, a respite from the turmoil was overdue. Even in a global recession, prices don't fall continuously.

But they do fall, and it's not clear that the markets are through with discounting additional economic troubles. One sign for concern is that as markets rose last month, the estimates for the world economy worsened. Both the IMF and OECD are now projecting outright declines for global GDP this year. The OECD's projection is quite a bit worse, anticipating a 4% drop in the world economy vs. a relatively mild fall of 0.5%-1.0%, according to the IMF's estimate. That may look mild on a single-nation basis, but in the context of the global economy it's quite steep, not to mention unusual.

But for the moment, there's March. As our table below shows, everything popped last month. Equities across the world delivered a stellar performance, with emerging markets soaring by more than 14%. U.S. equities generated a robust gain as well in March, advancing nearly 9%.

March, in fact, was one of the better months for stocks generally in many a moon, proving if nothing else that powerful rallies can and will show up in nasty bear markets. But let's not forget that we're in a bear market and it's not yet over. Economically speaking, there's not much confidence about where we are in the cycle. Yes, there have been some encouraging signs recently, as we've discussed, including here and here. But the full brunt of the global recession isn't yet known. By our reckoning, coming to terms with the beast will take another quarter or two, perhaps longer.

The equity market will no doubt play its traditional role of anticipating the rebound, which means that prices will start turning up well ahead of macroeconomic data confirmation. But it's still too early to assume that the turning point is in sight.

That said, there's an enormous amount of money in cash and equivalents. At some point, perhaps sooner than we think, the crowd will grow weary of earning nothing. The appetite for risk is set for a rebound. But not yet. Strategic-minded investors will want to stay vigilant however, and take advantage of selling. But it's still premature to call for outright buying.

I had the idea of pulling some kind of prank on my readers this April Fool’s Day, but with all the moving related stuff I’ve been doing I haven’t had the time to put together something really fun. Instead, I’ll just provide my monthly report on the posts which grabbed the most attention and interest based on page views, comments and all that. Here they are.

April is definitely going to be interesting. March was crazy because of my moving, but this new month is setting up to be very productive indeed. Keep your eyes out for new developments. I’ve got loads of things on my to-do list including starting a podcast, improving this website, and starting a new site which focuses on an “over the shoulder” sort of teaching in regards to market analysis and trade strategizing to name a few.

I think technical analysis is crap, and I should study economics to swing trade forex

Very, very, very bad trading!

April’s Awesome Additions

Trading With Pivot Points, MAs and Oscillators

Thanks for the assistance

Overnight Global News

• The European DJ Stoxx 50 this morning is down -0.64% and June S&Ps are down -6.90 points (-0.87%). The Asia-Pacific stock markets today closed mostly higher with Japan (+2.99%), Hong Kong (-0.42%), China (+1.61%), Taiwan (+1.99%), Australia (-0.07%), Singapore (+0.13%), South Korea (+2.20%), India (+1.99%). An increased liklihood that General Motors and Chrysler will fall into bankruptcy is pressuring stock markets today. People familiar with the situation said that President Obama believes a quick, negotiated bankruptcy is the most likely way for GM to restructure and become viable and that if Chrysler can't form an alliance with Fiat SpA, it should also be allowed to go bankrupt. European unemployment in Feb jumped to a 3-year high of 8.5% as companies throughout Europe continue to shed workers. Retail sales in Germany, Europe's largest economy, unexpectedly fell -0.2% m/m in Feb and has now fallen in five of the last six months. Economic data out of Asia is weak as well with China's Mar CLSA Purchasing Managers' Index falling -0.3 to 44.8, the eighth straight month the index has been below the growth/contraction level of 50. In Japan, the Bank of Japan's Tankan index of sentiment among large manufacturers for Q1 fell more than expected to -58, the lowest level since the survey began in 1974. South Korean exports in Mar fell -21.2% from a year earlier, the fifth consecutive month that exports have declined as the global recession decimates the export-dependent economies of Asia.
• ISM manufacturing index Today's March ISM manufacturing index is expected to show a small +0.2 point increase to 36.0, matching the +0.2 point increase to 35.8 seen in February. The ISM manufacturing index during the global financial crisis late last year plunged from 49.3 in August 2008 to a 28-year low of 32.9 in December 2008. The index then rebounded mildly higher by 2.7 points to 35.6 in January and by 0.2 points to 35.8 in February. Despite the small recovery, the ISM index is still far below the boom-bust level of 50, indicating a deep recession in the US manufacturing sector.
• Vehicle sales Today's March total vehicle sales report is expected to rise slightly to 9.2 million units from 9.1 million units in February. The stabilization in vehicle sales above February's 27-year low of 9.1 million would be a welcome relief. However, the devastatingly weak sales level of 9.1 million units in February was 33.6% below the 13.7 million level seen in August 2008 (just before the global financial crisis emerged) and 43% below the 2007 average of 16.2 million. Weak auto sales are decimating the entire vehicle value chain, from auto parts suppliers, to auto manufacturers, to auto dealers. The markets will quickly jump on any unexpected pickup in auto sales as a sign that the freeze in consumer spending may be thawing a bit.
• ADP employment change Today's March ADP employment change is expected to show another massive loss of 663,000, adding to February's decline of 697,000. The ADP employment change is loosely correlated with the US Bureau of Labor Statistics payroll report. Friday's March unemployment report is expected to show a 658,000 decline in payrolls (following February's 651,000) and a +0.4 point increase in the unemployment rate to a new 25-year high of 8.5%.
• Pending home sales Today's Feb pending home sales report is expected to be unchanged on a month-on-month basis following January's sharp decline of 7.7% m/m. On a year-on-year basis, Jan pending home sales were down 6.6%. The pending home sales series does not look particularly bad on a year-on-year basis only because the year-earlier base is so low and is relatively easy to beat. The pending home sales report measures the change in home sales contracts and generally leads to existing home sales within one to two months, thus providing some leading information on the existing home sales series. US existing home sales in February showed an unexpected rise of +5.1% to 4.72 million units, although up to 40% of recent home sales have been at distressed prices due to a foreclosure or short sale. Still, any hint of an increase in home sales would be a welcome relief to the US housing market, which still has a huge overhang of homes on the market for sale.
• Mortgage apps The markets will be watching to see if mortgage applications continue to rise with the recent drop in mortgage rates. Last week, the weekly MBA mortgage applications index rose +32.2%, with the purchase sub-index up +4.2% and the refinancing sub-index up +41.5%. In the week ended March 26, the 30-year fixed mortgage rate fell another 13 bp to a new record low of 4.85%. Mortgage rates are falling in response to the FOMC's announcement after its March meeting that it was boosting the size of its mortgage security purchase program to $1.25 trillion from $500 billion and the size of its purchase program of Fannie/Freddie/Ginnie debt to $200 billion from $100 billion. Lower mortgage rates boost the US economy through making home purchases more affordable and by allowing homeowners to refinance existing mortgages, thus putting more cash in their pockets each month.

Overnight U.S. Stock News

• June S&Ps this morning are down -6.90 points on bankruptcy concerns for General Motors. The US stock market yesterday moved sideways in positive territory throughout the day and finished higher (Dow +1.16%, S&P 500 +1.31%, Nasdaq Composite +1.78%).
• Bullish factors for stock prices yesterday included (1) strength in bank stocks as the interbank lending markets continue to show signs of thawing after the 3-month dollar Libor rate fell to a 2-month low and the TED spread narrowed to a 1-month low, (2) end-quarter window dressing of portfolios by money managers who may purchase stocks that have gained the most this quarter, (3) the prediction from JPMorgan Chase that US stocks will have a "more constructive" second half of this year as economic data improves, and (4) the 9.7% jump in Alcoa on talk that BHP Billiton, the world's largest mining company, could make a takeover bid for Alcoa, the biggest US aluminum producer, as buying new production would be cheaper for BHP than building new mines.
• Bearish factors for stock prices yesterday included (1) a tumble in homebuilders on concern the US housing slump may continue after the US Jan S&P/CaseShiller home price index dropped for the 24th consecutive month and declined by the largest amount since data began in 2001, (2) the unexpected decline in the Mar Chicago purchasing managers' index to a 28-1/2 year low, and (3) the prediction from Deutsche Bank AG that the three-week rally in global stocks will end because valuations still aren't cheap enough, while problems with mortgage-backed securities will continue to dog the financial system.

Today's U.S. Market Focus

• June 10-year T-notes this morning are unchanged. June T-note prices yesterday added to Monday's gains and closed up +10 ticks. Bullish factors for T-note prices yesterday included (1) the weaker-than-expected Jan S&P/CaseShiller home price index which fell by the biggest amount since the index was created in 2001 and has now declined for 24 consecutive months (-19.0% y/y versus expectations of -18.6% y/y), (2) the weaker-than-expected Mar US consumer confidence (+0.7 to 26.0 versus expectations of +3.0 to 28.0), and (3) the unexpected decline in the Mar Chicago Purchasing Managers' index to a 28-1/2 year low (-2.8 to 31.4 versus expectations of +0.2 to 34.4). Bearish factors for T-note prices yesterday included (1) reduced safe-haven demand for Treasuries after the equity market rallied, (2) the prediction from Citigroup that there could be a rapid rise in interest rates as Treasury supply continues to surge and quantitative easing efforts prove ineffectual in keeping interest rates low for a significant period, and (3) signs that the interbank lending market continues to thaw after the 3-month dollar Libor rate fell 2 bp to a 2-month low of 1.19% and the TED spread narrowed to a 1-month low, reducing safe-haven demand for Treasuries.
• The dollar index is little changed this morning with the dollar/yen -0.05 yen and the euro/dollar +0.17 cents. The dollar index yesterday finished with moderate losses. Bearish factors for the dollar yesterday included (1) reduced safe-haven demand for the dollar after the stock market rallied and the 3-month dollar Libor rate declined to a 2-month low of 1.19%, (2) the prediction from Credit Suisse Group AG that the euro will remain "well-supported" as the ECB will continue to be reluctant to cut rates or engage in quantitative easing, and (3) concerns the US recession may be deepening after the US Jan S&P/CaseShiller home price index fell by a record amount and the Mar Chicago purchasing managers' index unexpectedly declined to a 28-1/2 year low. Bullish factors for the dollar yesterday included (1) the prediction from Deutsche Bank that the dollar will gain 11% against the euro in the next year as longer-term European interest rates fall relative to the yield on the 10-year Treasury note, and (2) the drop in the yen to a 3-week low against the dollar after Japan's Prime Minister Aso said Japan's economy, the world's second-largest, is still in a state of crisis.
• May crude oil prices this morning are down -$1.48 a barrel and May gasoline is -3.63 cents a gallon. May crude oil prices yesterday erased an early rally and traded mixed until early afternoon when they rallied the remainder of the session and closed +$1.25 a barrel. May gasoline closed +2.75 cents a gallon. Bullish factors for crude oil prices yesterday included (1) the weaker dollar, (2) a rally in the equity market, stoking optimism the economy will rebound and strengthen energy demand, and (3) expectations that today's weekly DOE inventory report will show inventories of gasoline and distillates falling as refiners continue to slash capacity due to weak demand and seasonal maintenance. Bearish factors for crude oil prices yesterday included (1) concerns the US recession may deepen and energy demand will remain weak after the weak Jan S&P/CaseShiller home price index and Mar Chicago purchasing managers' index, (2) concerns that overall global energy demand will remain weak after Japan's unemployment rate shot up to 3-year high in Feb and Germany's unemployment rate rose to a 15-month high in Mar, and (3) expectations that today's weekly DOE inventory report will show US crude inventories rising to a 15-year high. Expectations for today's weekly DOE inventory report are for a +3.0 million bbl build in crude oil inventories, a -1.5 million bbl drop in gasoline stockpiles, a -1.5 million bbl decline in distillate inventories, and a +0.3 rise in the refinery capacity rate to 82.3%.

Today's U.S. Earnings Reports

Earnings reports (confirmed releases for companies with market caps above $5.0 bln listed by mkt cap): n/a (BEST earnings consensus $0.00 per share)

Global Financial Calendar