With both of these indexes you can see they are overbought and pushing a resistance level for the time being. For All About Trends, before we can begin to make the case for the market to go higher, we must first work off this oversold condition by either completing a Pull Back Off Highs (POH) pattern or consolidate sideways.  At least that’s what we need to see on the daily charts.

The 60-minute charts are another story – that being they are short-term oversold.  This suggests we COULD make another trip back up to the highs, at least in the very short-term.

As you can see, the full stohcastics are in the deeply oversold territory. One can also see that off the lows we’ve pulled a 5 waves up (abcde) Elliott Wave affair.  So the big question at this moment in time is: Was that it? 

After all the daily charts show major resistance levels being hit OR do we still have a little bit more work to do to stage a full blown ABC up as shown in blue.  One thing is for sure as you can see from the A? down to the B? that you have the makings of a Pullback Off Highs (POH) developing. The same holds true for the OTC Composite Index below.

In summary:  Going into this week we come away with asking Was That It? Or are we going to build out a larger ABC up, then down.

While on the subject of Waves, lets take a look at a few…  

When looking at the three main indexes we come away with a potential divergence. The divergence comes from where the OTC Composite MAY have completed its five waves down of the sequence but the Dow Industrials and S&P 500 may have one more run back down.

IF this index holds true to form and traces out a five waves down to end the first leg of this bear market, then a retest of the lows are in order.  However, don’t fall into the trap of “well gee, if we are going to retest the lows and I go short right here and we do retest the lows I will make X dollars.”  The trap with that thinking is that you then attach yourself mentally to a particular outcome. And if that outcome does not transpire, you’ve set yourself up for disappointment. This is what Kenny Rogers meant when he said “don’t count your chips till the dealing is done.”  
 
[Note: In order to conserve space we won't show the S&P 500, but it has that same look.]

As you can see, one could say we’ve completed five waves down off the highs. The 5th wave MAY have turned out to be a truncated 5th wave, which may have shown up in the form of a double bottom with a shake out low. HOWEVER, even if that is the case, this index is still big-time overbought as shown by the RSI and Full Stohcatics settings (Red Circles). So even if that was it, expect a short-term pullback off these levels.  

When looking at the true market bottoms of the Great Depression and the bear market of 2000-Oct. 2002, it took 4-6 months. And you didn’t know that was the bottom for at least a month after that. While history doesn’t always repeat itself, it often rhymes.
 
In summary, we need to see some sort of pullback off highs pattern develop in the overall markets, which will reset our indicators.

Sincerely,
David Grandey

What Does One Wild Week Mean For The Markets? was originally featured in the Penny Sleuth.

So, other than the NASDAQ dominance, is there anything in common amongst these stocks? Well, you’ll find a lot of medical and technological stocks in this bunch.  Below are some brief descriptions of each company…

ICOP Digital, Inc (NASDAQ: ICOP) engineers, produces and markets mobile and stationary surveillance solutions for law enforcement. ICOP shares started the year at 16 cents and have quickly risen to $1 over the past few weeks.

Targanta Therapeutics Corp (NASDAQ: TARG) is a biopharmaceutical company focused on the development and commercialization of antibiotics for infections treated or acquired in hospitals and other institutional settings. The Medicines Company (NASDAQ: MDCO) recently announced that it would acquire 100% of Targanta’s outstanding shares. This news helped launch the stock from 61 cents to $2.50.

Zoom Technologies, Inc (NASDAQ: ZOOM) designs, produces, sells, and supports broadband and dial-up modems, voice over Internet protocol (VoIP) products and services, and Bluetooth wireless products.

Grill Concepts, Inc (NASDAQ: GRIL) develops, owns, operates, manages and licenses full-service upscale casual dining restaurants under the name Daily Grill and fine dining restaurants under the name The Grill on the Alley. With a market cap of only $6.8 million, GRIL shares have spiked from 24 cents to 77 cents over the past month.

North American Scientific, Inc (NASDAQ: NASM) designs, develops, produces and sells products for radiation therapy treatment, primarily in the treatment of prostate cancer. The recent jump in NASM shares has helped the company regain compliance with the NASDAQ Capital Market listing regulations.

California Coastal Communities (NASDAQ: CALC) is a residential land development and homebuilding company with properties owned or controlled primarily in Orange County, California, and also in four other Southern California counties. On Jan 2, the company sold 17 model homes for $25 million. The news helped push their stock from 56 cents to above $1.

Anadys Pharmaceuticals, Inc (NASDAQ: ANDS) is a biopharmaceutical company focused to develop medicines in the areas of hepatitis C and oncology. Due to some positive news on a recent drug study, shares of ANDS have risen from $1.81 to $5.

Quantum Group, Inc (AMEX: QGP) is engaged in providing consulting and sourcing services for HMOs that market Medicare Advantage managed healthcare plans, as well as to healthcare providers in the state of Florida. In mid-January, QGP announced a multi-year service agreement with IBM.

Nextwave Wireless, Inc (NASDAQ: WAVE) is a mobile broadband and multimedia technology company that develops, produces and markets mobile multimedia and wireless broadband products, including fourth generation (4G) wireless broadband semiconductors.

Aviza Technology, Inc (NASDAQ: AVZA) designs, manufactures, sells and supports semiconductor capital equipment and process technologies for the global semiconductor industry and related markets. In early January, Aviza raised their net income guidance, which helped launch the shares from 10 cents to 30.

Incidentally, the 10 stocks above aren’t just the top penny stocks of 2009; they’re also the top performing stocks on any of the major exchanges…

Let’s take a look, for comparison sake, at the top 10 stocks from the Dow so far in 2009…

As you can see, there’s quite a contrast in the top performers from each category. As you’d probably expect, the top blue chips have had more modest returns than the top penny stocks. Although the performances of IBM and Kraft have been impressive thus far in 2009, those companies don’t offer investors the same explosive growth potential that can be found with small cap stocks.

Even with the ongoing market mayhem, penny stock investors still have the opportunity to grab some big gains. It’s not an easy task, but careful research and patient buying can pay some huge dividends down the road.

Sincerely,
John Schuler

January 27, 2009

The Top Penny Stocks of 2009 (So Far) was originally featured in the Penny Sleuth.