Range bound or get loose under 1,100?

Another wild week we had, markets were very ugly: Dow -6.4%, SP500 -6.6%, Nasdaq -5.3, Russell -8.8%. Commodities took a heavy beating also: Copper -16.5%, Gold -9.6%, and Oil -9.2%. Only two indexes up last week were the volatility index +30% and the US Dollar +2.5%. The moves we have seen in the US dollar since Bernanke spoke in April have been bullish to say the least. With no set idea of anymore stimulus, it is pound town for commodities as investors flock back to King Dollar and treasuries.

Bernanke’s speech was anticipated by many on Wednesday afternoon to once again prop the economy up with “Operation Twist” buying of long dated maturities (30yr notes). Investors did not like this as they sold the ES off 35 handles in 90 min. Those hoping for a rebound Thurs. morning were not going to get it as it continued from 1,166 breaking through a strong support of 1,120 to 1,113. Shorts covered in the last half hr to 1,130. Friday was more of a digestion/ slow day pretty much with a 10 handle range from unch to positive.

It was also a historic week for the 10 year note; we saw the yield dip under 2% earlier this month just to shoot right back up to 2.13% last week on a hope rally. This week was the sure test of Jeff Killburg’s (@thekillir) 1.67% target. We took a huge gap down to 1.7% this week, a 30+ basis point move, something not seen since Fall ’08. As of right now, the 10 year note is at historic all-time lows.

Picture above is the 10 year note showing huge drop-off since ending of QE2 in June. How many more weapons does Bernanke have up his sleeve?

I have also established new trading ranges in the ES this week. Even though we have broken through a huge 1,120 level, we have not closed below there. Thursday afternoon was indeed dicey trading under 1,120; it seemed as though the bulls were trying to defend, lost for a few minutes then bought them back again. This to me signals a bullish sentiment, if we closed on those lows, the ES could have gone anywhere below 1,120 Friday.

Notice how the same thing happened back in late August when we broke the pivot, we saw huge gyrations for a couple days, then shot back up again to the upper 1,230 resistance. If we start off the week with 2 red days and a close below 1,110 sell it till my next ultimate low target 1,050.

Did not do any trading this week, so I have nothing to update in that way, though I would like to highlight what I mentioned in last week’s blog about AutoZone ($AZO). As I said, after the earnings report, we would see profit taking down to near $300-310 then load back up. The report was very good, still seeing a lot of growth in the company as they blew past expectations.

Chart of $AZO above shows a nice bounce after breaking through pivot near $312; sold off about $20 from its all-time high. I’d be a buyer if it did a stock split, too pricey to trade as I have said before.

Earnings front this week has me looking at a couple cheap names where I could put some $ to work. First is Sealy Coropration ($ZZ). Via Google Finance they manufacture and market a range of bedding products, including mattresses and mattress foundations. The Company’s bedding products are manufactured and marketed in the Americas under its Sealy, Sealy Posturepedic, Stearns & Foster and Bassett brand names. In addition, it manufactures and markets specialty (non-innerspring) latex and visco-elastic bedding products under the Embody, Stearns & Foster, Reflexions, Carrington Chase, and MirrorForm brand names, which it sells in the specialty bedding category in the United States and internationally.

The company has recently hit a new Mar 2009 low of 1.55, closed at 1.59 Friday. Quarter By quarter, the company has had a loss since August of 2010 to their recent report in May 2011. Aug. 2010 showed a 15M loss and they have managed to bring the loss to only 377K this May. I am being optimistic in them reporting a slight profit to a better than expected loss. I will buy $ZZ if it goes under $1.55 Monday before the report Tuesday.

Shown above is a chart for $ZZ with my target.

Another is Micron Technology ($MU). Micron specializes in making semiconductor chips and RAM. Looking at their income statement comparing March and June 2011 q/q they appear to have brought their operating income from $179M to $237M by cost cutting from 1.82B to 1.66B. They also ended up with less revenue (2.25B v. 2.13B) Net income went up by only $3M dollars compared to March. I’m looking for a little more bottom-line growth and a test of the 7.00-7.25 range. Median target for Micron is 9.65 via Yahoo Finance.

Above is ($MU)

Going to be another fun, volatile week folks, stay tuned to @peter_eller10 for more. Good luck trading!