Bandit Broadcast for 9-23-2012

Good evening StockBandits!

Stocks closed Friday on a weak note after pulling back from their mid-session highs, leaving them with mixed results and narrow net changes from Thursday night’s levels. For the week, the indexes simply marked time as they digested the QE3 pop. That was not a poor showing by the bulls, but neither did they build on their post-FOMC strength.

The question on the minds of many right now is whether this is all stocks have after receiving the latest open-ended stimulus plan. On one side of the argument is the fact that all previous stimulus has lifted equities, and that this will be no different. We’re also currently in a 3-month uptrend with no negatives yet to slow things down. However, the other side of the argument is that much of the recent lift was in anticipation of QE3, and now that it’s official what further catalysts can move stocks until earnings season arrives in a few weeks. Beyond that, we’ve got a November election fast approaching which remains undecided, and that could pose as a headwind for stocks with major uncertainty looming.

As a trader, my view comes from the charts. I don’t mind taking a biased approach, so long as I remember to shift that bias when conditions warrant. Right now we’re in an uptrend, and during its progression from the June lows we’ve seen it become arguably stronger. Early in the move, we were getting healthy pullbacks and it was tough sledding on the upside. Since August, however, we’ve lifted and rested rather than rallying and pulling back, and that points to greater buoyancy in prices. After all, if the profit-taking is rather non-existent, that’s strength, isn’t it? Yes and no. Some profit-taking is helpful in fact, and can help to prolong the duration of a trend by allowing shares to rotate from weaker hands to stronger.

My view at this point is that the rally does not yet deserve doubt. Some weak finishes like today point to a bit of short-term fatigue, but until we see heavy selling kick in (and at some point we will) followed by feeble bounces, the long side remains the side to favor.

I am back to cash currently on an overnight basis and will actually remain that way for this week. That’s due to my traveling for a vacation with my family for a few days (hello Disney!), during which time my attention will be off the market. This will be the lone report for the next few nights, and then things will return to normal next weekend with a Sunday report. I am allowed up to 4 weeks of vacation per year to rest and recharge, and this looks like a good time to do so as the market shows a little hesitation. I suspect that letting the charts regroup while I recharge will serve me well, but in the meantime I will leave you with a few names to focus on (with my notes on the charts) as these are acting well.

First the indexes and some key levels…

NAZ