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Outlook

Markets move to new highs

By | Jims Notes, Outlook, Research Post | No Comments

OUTLOOK: Week of September 18th

We spent last week fighting the hurricane and getting power, internet and phone services back. Definitely not how I would like to spend time, but thankfully no big damage… just plenty of rain, sweat, and frustration living in the dark and without air conditioning. All said, we are fine and happy to be getting back to normal.

The markets continued their ways of looking for direction. The gap move on the upside last Monday held throughout the week with the major indexes closing at new highs.

Nine sectors closed the week on the upside with financials (XLF) and energy (XLE) leading the upside move. The upside in financials helped push the sector back into the positive territory from earlier in the month. Energy is still looking for faith in the upside in the price of crude oil which closed at the $50 per barrel level again. The downside was limited to REITs (RWR) and utilities (XLU). The moves for the week were a positive overall as the buyers returned to push the indexes to new highs. The S&P 500 index closed up 39 points at 2500 for the week posting a new high. The biggest movers in the index were RRC (reversal of selling on Thursday), CXO (bottom reversal), HP (bottom reversal in play), NVDA (break from a topping trading range), and CHK (bottom reversal). Solid move in the energy and technology stocks to lead the index higher. The downside leadership came from EFX, REGN, INCY, VMC, and MLM. A mixed bag of sectors leading the downside the week. Gold (GLD) moves lower as money again rotates towards growth on the week. Tighten your stops on positions as volatility and speculation continue. The dollar (UUP) dumped lower and can’t find its way under the current pressures. The emerging markets (EEM) are breaking out to a new high with a modest gain. The Volatility Index (VIX) closed at 10.1 as the worries subside and stocks rise on optimism. The key is to remain disciplined within your trading strategy and not let the anxiety of the situation change your overall strategy. Manage your risk and stay focused on the horizon, not the rear-view mirror.

The scans on Friday showed flat movement with some sectors shinning on the day. The semiconductors (SOXX) posted a solid gain to resume the upside momentum. Brazil (EWZ) continues to climb in the current uptrend. Gold miners (GDX) are moving lower and testing the first level of support. Watching how that unfolds and what opportunities come on the next move. The energy (XLE) stocks continue to believe in the rise in crude oil (USO). China (GXC) made positive move Friday to move back to the top of the current trading range. Telecom (IYZ) posted positive bounce to end the week and make an attempt at a bottom reversal. There are opportunities if you have the patience to dig and then manage the risk of the positions. Patience as the new week unfolds.

The key word remains to be PATIENCE. Not something many traders like. We started the week with some positive upside move and managed to hold the upside. There remains plenty of volatility in direction and each week holds some thing new to consider. We all want to believe we can see forward, but the reality is we can only see today. Thus, we must do what our strategy tells us to do today, and tomorrow will take care of itself. Hard lessons to learn as our analytical brain wants us to believe we have the solution and can predict the future. Keep your stops in place and your eyes focused on the horizon taking what the market gives.

KEY, INDICATORS/SECTORS TO WATCH:

Biotech (IBB) remains a sector of speculation… The speculation from Washington relative to what will happen with drug prices and healthcare. There is no clear resolution to that issue and that has now led to money rotating to where is it has better opportunities and clarity. Nice upside move and nice follow through to add a position. Entry $318. Stop $325 (adjusted). Flag pattern in place from the vertical move higher. 

REITs (IYR) had been lagging in response to interest rate worries related to the Fed promise to hike rates multiple times this year. The sector tested the $76 level of support and bounced back to resistance and tested, and bounced, and has now cleared the $81 resistance… We continue to focus on managing our risk and collecting our dividend as this all unfolds. This is a growth and dividend holding with a 4.2% dividend currently. Entry at $75.75. Stop $76.25 (adjusted). Nice bounce for the week closing above the $81 resistance. Looking for the follow through to start the week.

Treasury yields (TNX) moved back to 2.2% last week as money continues to find safety. Just when you thought it was safe to go back into the water… the Fed changes its collective minds. TLT rallied on worries and money rotating to safety. $124.10 entry, stop $122. Bounce in yield to end the week and looking to see if the bottom is in for the move lower. Bonds moving higher in return (TLT).

Gold (GLD) Gold remains in a long-term uptrend with a broad trading range in play the last five months. The volatility within the trend is speculation and news driving money. The selling was more of the speculation, just as the current buying is on speculation the dollar and the Fed will remain neutral. Bounced off support at the $114 level, cleared resistance at the $117.38 mark (entry) and hit the $123 target. Stop $124.20 (adjusted). Gold miners (GDX) cleared resistance as well at $24.27 and moved higher. Entry $23 hit, Stop $24 (adjusted). The test back to key support put the exit point now at the $24 level. The dollar is key for now.

Crude Oil has become a story of what if’s more than what happened or is happening. Supply remains the overwhelming issue, but the weaker dollar is having some influence near term. The last two weeks the commodity has managed to fight it’s way back to the $50 level of resistance. Watching how this unfolds at the current levels.

Energy stocks (XLE) have fallen since the December highs as the OPEC deal to cut production has not resulted in any real measurable cut that would impact prices. The double bottom pattern clears $63.22 for entry and stop $$65 (adjusted). Watching how it unfolds to start the week after the test on Friday.

Volatility Index (VIX) This week was less volatile and more consolidation. Back to the lows closing at 10.1 for the week. Short side trade of the index remains in play.

The positive move for the week helps build some upside confidence again as investors continue to bounce on both sides of the market. The move to new highs for the S&P 500 (SPY) and the NASDAQ (QQQ) hitting against the previous highs gives hope to most for the uptrend follow through. Energy (XLE) showed some improvement until Friday with a move lower. Financials (XLF) showed some upside with a small test on Friday. Semiconductors (SOXX) cleared the next level of resistance and showing positive uptrend again for the sector. Agribusiness (MOO) produced a upside break to confirm the uptrend. There are more questions than answers for this market and we will continue take it one day at a time. Stay focused and disciplined in all trades or positions. Speculation remains the primary driver in the current market environment. The small-cap index (IWM) moved higher from the flag pattern after the bottom reversal in August to reestablish the uptrend. The key remains patience and as the tug-o-war for position continues.

Daily Scan Results:

FRIDAY’s Scans 9/15: Some selling in the market early that managed to bounce back and keep the current trend moving to the upside overall. Watching patiently as we start the week of trading with plenty of questions to be answered.

  • Semiconductors (SOXX/SOXL) solid break higher and continuation of the uptrend currently in play. Cleared $102.20 entry and follow through.
  • Brazil (EWZ/BRZU) upside continued after small test. This remains one of the current leaders for the sectors.
  • Gold Miners (GDX/DUST) downside gaining some traction and the bottom reversal setup for a trade. Watching the $22.90 mark to clear and add DUST.
  • China (FXI/YINN) upside attempting to break from the consolidation pattern. Look for move above the $30 mark for adding to positions.
  • Silver (SLV/ZSL) the downside could come into play as the topping pattern is in play. Watching for a move above the $29.70 level for entry on short trade.
  • olid follow through on the move above resistance and $23.50 entry. The target for the move is $26.72. Stops at $23.50 now and watching how it progresses in light of crude moving higher.
  • Crude Oil (USO/UCO) upside continues as the worries over supply remain. This is all storm related and a trading opportunity. The entry above $16.15 hit and looking for how it unfolds near term with stops at the $15.75 level for now.
  • Europe (IEV/EURL) remains positive uptrend and looking for break from the consolidation pattern.
  • Healthcare (XLV/CURE) returns to the top of the trading range and resistance. Looking for a break above the $44.50 level as a signal to add to existing positions.

Watching these sectors as well following this weeks trading… IBB, IYZ, UCO, TECL, WEAT, DBA, and TNA.

 

Sector Rotation: 

  • XLB – Materials moved lower off the July high and have managed to test support at the $53.50 level. The upside resumes and the uptrend remains positive for the sector near term. Entry $54.75, Stop $54.75 (adjusted).
  • XLU – Utilities bounce off support at the $50.88 level and have followed through nicely the six weeks to move to new highs. Entry $52.25, Stop $54.25 (adjusted). Money is rotating to the sector as money heads towards safety. Topping currently and watching how this unfold. 
  • IYZ – Telecom has become more of a trading sector than the buy and hold historically. The volatility has increased and thus swing trading works better. Some buying? Some selling? Retested the lows as the downside took root and short trade at $30.90. Adjust your stop to break even $30.90. Nice bounce off support  to end the trading week.
  • XLP – Consumer Staples moved lower on economic worries and higher interest rates. Watching for a move above $55.50 to get my interest near term. Another test of the lows and reversal in process.  The upside on reversal still in play. 
  • XLI – Industrials moved sideways the last two months and now moved back near the previous highs. The long term uptrend remains in play and we will watch this unfolds near term. Follow through on the bounce off support and solid move higher.
  • XLE – Energy is a house of cards with volatility in the commodity and news surrounding the production and supply data. Some of the uncertainty has come out of the sector with crude moving back near the $50 mark. Entry $65.20 with stop at $63.60. Watching as this unfolds short term.
  • XLV – Healthcare has been a big rollercoaster ride with a promise to reform healthcare and then the failure to follow through. The test of support reversed and the sector has pushed back a new high. The entry at $79.50 playing out on the upside. Stop $81.50.  
  • XLK – Technology testing near the current highs as the uptrend remains in place. The semiconductors are back with a positive swing on the upside.  The sideways activity tested the $56.75 support. Entry $48.50. Stop $56 (adjusted). More positive than negative in the sector currently with IGN and SOCL moving in positive direction.  
  • XLF – Financials pushed lower on worries about interest rates, the Fed, and N. Korea. The retest of support at the $24.64 level is a concern for the short term uptrend. Broke support at $24.65, tested support at $23.80 and made move back above the $24.65 mark. No real momentum in the sector. Watching how it unfolds.
  • XLY – Discretionary Consumer lower to support at the $88.50 level with retail earnings pushing stocks lower. Entry $83.50. Stop $88.50 (adjusted). Watching how the Friday move lower plays out to start the week. Test of support again. Patience as this all unfolds near term.
  • RWR – REITs reacting to the current uncertainty around the Fed and the dollar. The longer term view clearly shows the trading range and the opportunity to collect the dividend while investors continue to make up their collective minds on direction. We added the position in December on the move off the lows and continue to babysit the dividend of 4%. Bounce in process. Big triangle pattern still in play.

Positive move is back… investors like what they hear and see enough to put money back to work and let the upside play out accordingly. Patience in taking what the market offers and nothing more. This week offered some moves in the energy sector as well as the technology stocks. We will let this move unfold and add positions accordingly.

FINAL NOTES:

Investors continued to be indecisive because the data is not conclusive looking forward. We all know the market trades looking forward and evaluates based on past data. The challenge remains an indecisive outlook and nerves over the current situation. The positive results last week from the buyers gives hope versus the downside attempts from the last two weeks. Data is positive overall for earnings and the winners are being rewarded. Money showed some rotation to growth for a change. This remains a market in transition and with that comes opportunities. Those are outlined above in the scans and sector notes. We will proceed with caution and patience taking what comes our way and fits our strategy for investing both short and long term.

ONE DAY at a time is the key for now. Take a longer term view for your overall portfolio and manage the risk of your short term trades accordingly. See you next week.

“Vision without action is a daydream… Action without vision is a nightmare.” Japanese

Sideways remains the theme

By | Jims Notes, Outlook, Research Post | No Comments

OUTLOOK: Week of August 28th

Looking for direction remains the theme. Commodities benefactor of the weaker dollar along with the emerging markets (EEM). Bonds are a benefactor of the move towards safety and a Fed unwilling to act on interest rates. Without strong data the markets continue to drift along with the news and the speculation. We have to take what it gives and keep moving forward.

Ten sectors closed Friday on the upside with REITs (RWR) and industrials (XLI) leading the upside… barely. REITs were one of the leaders for the week as well. Overall it was a quiet day to match the week. The sole downside came from technology (XLK) but no damage was done to the sector. We head to the weekend with the same questions about leadership and the outlook for growth. The S&P 500 index closed up 4.1 points at 2443 and holding below the 50 DMA but remained near support at the 2435 level. It is still a flip of the coin based on the analyst, but the charts are still favoring the short side option should the bounce fail. In other words, we are back where we have been for the last month plus… indecisive on direction. The biggest movers in the index Friday were AAL (bottom reversal attempt), ADSK (break to a new high from trading range), LUV (bottom reversal attempt), SIG (break to a high of previous range), and JWN (stuck in range). Some leadership showing in ITA and XRT. The downside leadership came from ULTA, AVGO, TRIP, NRG, and HRB. Mixed as stocks struggling on data. Gold (GLD) bounced off test support at the $120.45 level and back to the previous highs (Doji on close). Gave up the break higher, but remains positive as it attempts to clear resistance. The dollar (UUP) dumped lower to end the week. The emerging markets (EEM) are breaking out to a new high. The Volatility Index (VIX) closed at 11.1 as anxiety subsides with indecision activity. Anxiety is still in play intraday and watching how it unfolds today. The key is to remain disciplined within your trading strategy and not let the anxiety of the situation change your overall strategy. Stops in place and keep looking forward. Manage your risk and stay focused on the horizon, not the rear-view mirror.

The scans on Friday continue to show the leaders daily are news driven… some of the same suspects moving up and down as traders enjoy the volatility and speculation. Natural gas (UNG) moved lower to end the week and remain in the current bottoming trading range. Short side setting up again technically. China (GXC) gapped higher to close a big week for the country ETF. Emerging markets (EEM) are gaining momentum with the money rotating from advisors and hedge funds crowding into the sector. Brazil (EWZ) posted another solid move higher this week in the current uptrend helping EEM. Crude oil (USO) remains indecisive with a close lower on the day. Europe (IEV) making move back towards the previous high. Greece (GREK) made move back towards the previous highs. Base metals Gold miners (GDX) were back on the upside along with gold (GLD). Treasury bonds (TLT) added to the upside. XME move through the $31 resistance level to resume the upside move. Coal (KOL) completes a cup and handle break higher… very positive weekly chart. Pharma (XPH) cleared $41.04 resistance. Interesting move from homebuilders (NAIL) bottoming attempt to catch support. There are opportunities if you have the patience to dig and then manage the risk of the positions.

The key word remains to be PATIENCE. Not something many traders like. The lack of direction, volume and breadth leave the market open to news and speculation. That has been the key element most of the year. We all want to believe we can see forward, but the reality is we can only see today. Thus, we must do what our strategy tells us to do today and tomorrow will take care of itself. Hard lessons to learn as our analytical brain wants us to believe we have the solution and can predict the future. Keep your stops in place and your eyes focused on the horizon taking what the market gives.

KEY, INDICATORS/SECTORS TO WATCH:

Biotech (IBB) remains a sector of speculation… The speculation from Washington relative to what will happen with drug prices and healthcare. There is no clear resolution to that issue and that has now led to money rotating to where is it has better opportunities and clarity. No direction short term and no position currently as this all unfolds.

REITs (IYR) had been lagging in response to interest rate worries related to the Fed promise to hike rates multiple times this year. The sector tested the $76 level of support and bounced back to resistance and tested, and bounced, and… We continue to focus on managing our risk and collecting our dividend as this all unfolds. This is a growth and dividend holding with a 4.2% dividend currently. Entry at $75.75. Stop $76.25 (adjusted). A negative move last week, but it remains within the current range. Nice bounce for the week as the $81 resistance comes back into play.  

Treasury yields (TNX) moved back to 2.16% last week as money continues to find safety. Just when you thought it was safe to go back into the water… the Fed changes its collective minds. TLT rallied again this week on worries and money rotation to safety. $124.10 entry, stop $122.

Gold (GLD) Gold remains in a long-term uptrend with a broad trading range in play the last five months. The volatility within the trend is speculation and news driving money. The selling was more of the speculation, just as the current buying is on speculation the dollar and the Fed will remain neutral. Bounced off support at the $114 level, cleared resistance at the $117.38 mark (entry) and hit the $123 target. Stop $120 (adjusted). Need to clear the resistance at the previous highs. Failed attempt on Friday leaves questions on direction. Gold miners (GDX) are having the same resistance issues with a small break above resistance. Entry $23 hit, Stop $22.40. Added to positions.

Crude Oil has become a story of what if’s more than what happened or is happening. Supply remains the overwhelming issue, but the weaker dollar is having some influence near term. The break of support was reversed on Friday back above the $48 mark. Look for a follow through to the move on Monday. Entry $47.50, stop $44.35. Taking what the commodity gives and not asking any questions… purely managed as a technical trade.

Energy stocks (XLE) have fallen since the December highs as the OPEC deal to cut production has not resulted in any real measurable cut that would impact prices. The move lower and the break of the $63.72 mark was negative for the sector and the short side remains in play with the stop now at the previous support of $63.70. Watching how the bounce in crude oil Friday impacts the stocks. Small bounce on Tuesday’s rally and follow through the balance of the week. Patiently looking for some conviction.

Volatility Index (VIX) This week was less volatile and more consolidation. VXX entry at $47.80 hit again and stop at $46.50 on the close. Managing the position as the VIX calms down.

This was a dull week for stocks as investors put money to work on Tuesday, but no follow through the balance of the week on the buy side. REITs (RWR) were active in trading and added nearly 2% for the week. Telecom (IYZ) bounced back adding 2% as well. Overall the gains came from those sectors that sold the most while the balance ran in place. Commodities (DBC, DBB) remain positive with the weaker dollar and rising emerging markets (EEM). The rotation is away from risk and embracing safety. Throw in some good old fashion speculation on low volume and you have the current market environment. As we move to the final week of the month we will watch for the conviction to step up if the buyers are to regain control. The S&P 500 index (SPY) moved back above the $243.75 level and held for a positive sign. The NASDAQ (QQQ) remains weak. The small-cap index (IWM) broke support and the trendline off the December low. The bottom reversal in play for the sector currently. The key remains patience and as the tug-o-war for position continues.

Daily Scan Results:

FRIDAY’s Scans 8/25: Another day of drifting, but the sectors do manage to close in positive territory. The commodities and emerging markets lead and the other coast along looking for buyers. Taking what the market gives and nothing more.

  • REITs (RWR/URE) added to the upside and now at resistance. Looking for the continuation of the upside move.
  • China (GXC/YINN) runaway gap higher for the country ETF. The dump in the dollar and rising commodities helping China. Adjust your stops accordingly on the move.
  • Europe (IEV/EURL) resumed the upside move after testing support. Need to clear next resistance level ($33.80) and follow through on the upside. EWO, GREK, EWD, EWK posted solid upside move as well.
  • Oil Services (IEZ, OIH) bottom reversal in play. Watching how this and crude oil move to start the week.
  • Transports (IYT) testing support… a break lower is a negative sign to the broader index.
  • Treasury Bonds (TLT/TMF) upside remains in play as money rotates to safety and the Fed steps away from hiking interest rates.

Moves of interest to start the week… SOXS, ULE, LABD, DGAZ, KOL, FAS, TNA.

THURSDAY’s Scans 8/24: Boring day. I am not sure anyone is watching… maybe everyone is on their final vacation. Some moves to watch, but the lack of volume and breadth continues to weigh on investor psyche. I remain in patience mode.

  • Biotech (IBB/LABU) made a solid move in the bottom reversal to clear resistance at the $311.30 mark. Entry $312. Stop $308.50. XPH cleared $41.04 and equally positive.
  •  VIX index (VXX/UVXY) $49 entry. Watching how today unfolds.
  • Crude Oil (USO/SCO) short side showing more promise near term. UGA upside in play as well as KOL. UNG still in bottoming pattern. TAN consolidating.
  • Emerging Markets (EEM/EDC) nice upside break and confirm to a new high. Entry $104. Stop $$100.
  •  Cyber Security (HACK) double bottom pattern attempt to reverse the selling in the sector.

Nothing happening in either direction on the day and picking at what is moving near term. Trade what meets your strategy and practice patience.

WEDNESDAY’s Scans 8/23: No follow through on the upside move and that leaves us watching how it unfolds on Thursday. Same suspects are moving, but nothing has confirmed relative to the risk/reward. Patience is the trade of the day.

  • Brazil (EWZ/BRZU) cleared the upside move above $38.56 and heading higher… adjust your stop toe $36 and let it run.
  • Crude Oil (USO/UCO) positive day in an attempt to resume the upside move. $16.20 level to clear near term and then the previous highs. UGA moved higher as well.
  • Base Metals (DBB) continue the verticle move on the upside. XME added to the upside as well along with JJU, JJC and JJN.
  • Gold Miners (GDX/NUGT) attempting to clear resistance after the test.
  • Coal (KOL) broke through to new highs. Weekly chart completes a cup and handle pattern. Positive leadership from the commodity sector.

Watching SOXL, TMF, YINN, EDC, and ULE.

TUESDAY’s Scans 8/22: Rally Tuesday and watching how this attempt unfolds. The sellers stepped aside and the buyers, similar to last week, step in on low volume. There is nothing decided and we approach this with caution as the bias remains downside… We need to see a follow through from the buyers if they are going to take control.

  • Biotech (IBB/LABD) upside attempt again… watching.
  • Semiconductors (SOXX/SOXL) still in range and looking for a tradable direction.
  • China (GXC/YINN) upside gap to continue the uptrend… looking for entry point as this unfolds and upside move follows through.
  • Healthcare (XLV/CURE) upside attempt with biotech adding to the move.
  • Brazil (EWZ/BRZU) follow through on upside pattern. confirmed $38.45 entry to add to positions.

A lot of upside moves on a positive trading day. The follow through today is key… last week the move higher failed… another failure to confirm a reversal in the selling could be the catalyst on the downside. Watch and let this unfold.

MONDAY’s Scans 8/21: Mixed results on the day some bounce, some move sideways and a few move lower on earnings and speculation. Not enough to change anything on the day. Scans were nothing exciting as the usual suspects move or posture on low volume day.

  • Natural Gas (UNG/UGAZ) nice bounce in bottoming range still needs to clear the $12.75 mark for entry.
  • Crude Oil (USO/SCO) downside back after a bounce on Friday. Watching for direction.
  • Gold Miners (GDX/NUGT) break above the $33.21 level is an entry for upside move to add to positions. Need to confirm on the upside today.
  • China (GXC/YINN) bounced off support and attempting to resume the upside move. $24.65 entry… don’t chase.
  • Semiconductors (SOXX/SOXS) downside move on Monday but remains in the range. Cleared $28.45 resistance on short ETF and watching for confirmation in the selling.

Watching from Monday: KWEB, URE, ERY, CURE, ICF, JJC, LABU, and EWW.

Sector Rotation: 

  • XLB – Materials moved lower off the July high and have managed to test support at the $53.50 level. The topping pattern is negative and a break of this level will open the short side trade opportunity. Patience as this all unfolds near term. Double bottom in play.
  • XLU – Utilities bounce off support at the $50.88 level and have followed through nicely the six weeks to move to new highs. Entry $52.25, Stop $53.25 (adjusted). Money is rotating to the sector as money heads towards safety. Broke above $54.29 resistance and gaining.  
  • IYZ – Telecom has become more of a trading sector than the buy and hold historically. The volatility has increased and thus swing trading works better. Watching for now how this unfolds as sector moved back above the $31.35 mark. Entry $31.60, Stop $30.90. Some buying? Some selling? The big drop last Thursday is the key now… follow through hits our stop and the short side trade returns. positive reversal. 
  • XLP – Consumer Staples moved lower on economic worries and higher interest rates. The Fed talks last week to stand still on rates put a positive reversal in play. Watching for a move above $55 to get my interest near term. Another test of the lows.  
  • XLI – Industrials moved sideways the last two months and now breaking lower along with the broad markets. The long term uptrend remains in play and we will watch how the decline below the $67.50 mark impacts the current trend.gave back bounce. 
  • XLE – Energy is a house of cards with volatility in the commodity and news surrounding the production and supply data. There is still the issue of uncertainty towards the stocks. Broke $63.70 support and renewed the selling and short side of the trade. Another bottoming attempt? Reversal watch. 
  • XLV – Healthcare has been a big rollercoaster ride with a promise to reform healthcare and then the failure to follow through. Now the support at $78.50 is broken and the downside showing strength. Watching how this unfolds Monday with a follow through to the move lower in limbo. Holding above support.
  • XLK – Technology moved lower, but the uptrend remains in place. The semiconductors are weaker putting pressure on the sector overall. The sideways activity is testing the $56.75 support currently and the level to watch. Entry $48.50. Stop $56 (adjusted). Let the decision unfolds with a stop in place this week. 
  • XLF – Financials pushed lower on worries about interest rates, the Fed, and N. Korea. The retest of support at the $24.64 level is a concern for the short term uptrend. Entry $23.85, Stop $24.50 (adjusted). Patient for now. Let the direction unfolds and manage your money accordingly.
  • XLY – Discretionary Consumer lower to support at the $88.50 level with retail earnings pushing stocks lower. Entry $83.50. Stop $88.50 (adjusted). Some major reversals in stocks as you scan the sector overall… watching how the downside plays out to start the week. Testing support again.
  • RWR – REITs reacting to the current uncertainty around the Fed and the dollar. The longer term view clearly shows the trading range and the opportunity to collect the dividend while investors continue to make up their collective minds on direction. We added the position in December on the move off the lows and continue to babysit the dividend of 4%. Watching how the move below $91.77 support plays out on Monday. Bounce in process.

Sellers stalled on the move lower, buyers failed to push higher, dollar weaker driving commodities and money running to emerging markets. Sounds like a great time to head towards cash and less risky assets. That is what we see happening for now. The end of the month is here and we get more economic data to digest. Some positives were the four negative sectors holding support and utilities clearing resistance. If the rotation to safety continues we will see more rotation and lower volume going forward. Watching how it unfolds to start the week.

FINAL NOTES:

Investors are nervous plain and simple. Volume is favoring the sell side. Data is positive overall for earnings and the winners are being rewarded. Money is rotating to safety. This remains a market in transition and with that comes opportunities. Those are outlined above in the scans and sector notes. We will proceed with caution and patience taking what comes our way and fits our strategy for investing both short and long term.

ONE DAY at a time is the key for now. Take a longer term view for your overall portfolio and manage the risk of your short term trades accordingly. See you next week.

“Vision without action is a daydream… Action without vision is a nightmare.” Japanese Proverb.

Markets at key decision point

By | Jims Notes, Outlook, Research Post | No Comments

OUTLOOK: Week of August 21st

This is a market in transition. The challenge is patience to let it unfold. We confuse short term trends with the long term trends. For now, the short term is driving the direction and the volatility increased this week had only added fuel to the short term views. Trading the swings and emotions is perfectly fine as long as you have a defined strategy for doing so. I have outlined some below and we continue to look for the opportunities as they present themselves. Monday and Tuesday will be key to how this market unfolds short term as we either confirm the downside momentum from last week or the buyers show up and keep the upside dream alive. The party is far from over when it comes to speculation and news driving direction… take it one day at a time and let the direction unfold.

Five sectors closed Friday on the upside with utilities (XLU) and energy (XLE) leading the day. For the week only three sectors closed in positive territory as the sellers attempt to take control of the overall direction short term. Utilities and basic materials were the leaders for the week while the downside was led by telecom (IYZ) and energy (XLE). It is important to note as well that healthcare (XLV), industrials (XLI) and consumer staples (XLP) all broke key support levels on the week bring the tally to four sectors in a confirmed downtrend short term and one long term being energy. The shift in momentum over the last two weeks is a challenge for the broad index as the trend is being challenged overall short term. The S&P 500 index closed down 4.4 points on Friday at 2425 confirming the move below the 50 DMA and breaking key support at the 2435 level triggering a possible short trade. The long-term uptrend for the index remains in place, but the psyche of the investor changed this week as seen in the VIX index climbing to 14.2. The challenge for investors is the patience to let the short term direction unfold and the wisdom not to fight the trend. The biggest movers in the index Friday were DRE (reverse head and shoulder pattern), ISRG (break from trading range), ULTA (start of a bottom reversal), OKE (start of bottom reversal), and LNT (V bottom in play). The downside leadership came from FL, DE, NKE, UA, and LB reflecting the weakness in retail for the trading day. Gold (GLD) bounced off test support at the $120.45 level and back to the previous highs. Gave up the break higher on the close Friday, but remains positive. The dollar (UUP) is consolidating near the current lows. The emerging markets (EEM) stay in the current range. The Volatility Index (VIX) jumped to 15.5 showing the anxiety present on Thursday and closed at 14.2 on Friday. Anxiety is still in play and watching how it unfolds next week. The key is to remain disciplined within your trading strategy and not let the anxiety of the situation change your overall strategy. Stops in place and keep looking forward.Manage your risk and stay focused on the horizon, not the rear-view mirror.

The scans for Friday represent the anxiety and confusion from investors. Crude oil bounced off support on Friday to lead the day. USO gained 3.6% to push back towards the previous highs. Gasoline (UGA) put in a positive bounce as well to join crude. Energy (XLE) bounced finally, but remains challenged versus crude prices. Brazil (EWZ) moved back to the current highs and remains in an uptrend short term. Solar (TAN) remains in a consolidation pattern near the highs, with a positive move Friday. Base Metals (DBB) kept the vertical move higher alive with a positive day. REITs (RWR) remains challenged and the short side trade is setting up. The downside part of the scans is showing some muscle as sellers take control near term. Where are the opportunities? Retail (XRT), energy (XLE), industrials (XLI) and consumer staples (XLP) are leading the downside… obvious areas to watch for short trades. My views are to watch for the weaker dollar which in turn helps commodities and emerging markets. Interest rates should remain in the 2.1-2.3% range and not have much impact overall. Volatility (VIX) will likely be present on a news related basis and should the data fail to improve elevate for extended periods resulting in declining stocks prices. Inflation is not present. Overall more of the same with some rotation based on the developments with the Fed and Washington not willing to do anything to change the current path of the US economy. Focus on the near term as it impacts the current trends with reversals, bounces off support levels and moving averages… all impacting the technical read for the market near term. Patience in how you approach this market both short and long term. Let the news settle and the reality develop for the current trends. There are opportunities in all of this activity both long and short various sectors.

The news for the week came from the Federal Reserve. The reaction to the news is still in play. The greater challenge for the markets is the fact we completed a double drop without a bounce or buying from investors… this is a change in how the market has been operating in the current trend. The sell offs have been met with buying or buy-the-dip strategies. This time the buyers didn’t show up on the second dip… yet. If we continue below the previous low the change will be enough technically to allow the sellers to take control near term. That said, Monday and Tuesday of next week become a clear decision point to the market moving forward. The VIX index is elevated as anxiety has clearly become a part of the current environment.

The key word remains to be PATIENCE. Not something many traders like. We all want to believe we can see forward, but the reality is we can only see today. Thus, we must do what our strategy tells us to do today and tomorrow will take care of itself. Hard lessons to learn as our analytical brain wants us to believe we have the solution and can predict the future. Keep your stops in place and your eyes focused on the horizon taking what the market gives.

KEY, INDICATORS/SECTORS TO WATCH:

Biotech (IBB) remains a sector of speculation… The speculation from Washington relative to what will happen with drug prices and healthcare. There is no clear resolution to that issue and that has now led to money rotating to where is it has better opportunities and clarity. The break of support at $309 mark offered a short entry. The sector was already under distress from the inability to pass a reform bill… this only gives reason to sell. LABD hit entry at the $7 level. Stop $6.60. 

REITs (IYR) had been lagging in response to interest rate worries related to the Fed promise to hike rates multiple times this year. The sector tested the $76 level of support and bounced back to resistance and tested, and bounced, and… We continue to focus on managing our risk and collecting our dividend as this all unfolds. This is a growth and dividend holding with a 4.2% dividend currently. Entry at $75.75. Stop $76.25 (adjusted). A negative move last week, but it remains within the current range.

Treasury yields (TNX) moved back to the 2.4% level as the Fed talked of raising interest rates. The move to 2.2% came on the comments from Ms. Yellen and the Fed taking on a more dovish role towards rates. Just when you thought it was safe to go back into the water… the Fed changes its mind. TLT rallied again this week on worries and money rotation to safety. $124.10 entry, stop $122. Yields continue to decline helping the upside for bonds this week.

Gold (GLD) Gold remains in a long-term uptrend with a broad trading range in play the last five months. The volatility within the trend is speculation and news driving money. The selling was more of the speculation, just as the current buying is on speculation the dollar and the Fed will remain neutral. Bounced off support at the $114 level, cleared resistance at the $117.38 mark (entry) and hit the $123 target. Stop $120 (adjusted). Need to clear the resistance at the previous highs. Failed attempt on Friday is worth watching on Monday. Gold miners (GDX) are having the same resistance isssues and a break in both would be reason to add to positions.

Crude Oil has become a story of what if’s more than what happened or is happening. Supply remains the overwhelming issue, but the weaker dollar is having some influence near term. The break of support was reversed on Friday back above the $48 mark. Look for a follow through to the move on Monday. Entry $47.50, stop $44.35. Taking what the commodity gives and not asking any questions… purely managed as a technical trade. Positive news on the global supply data helping the short term outlook.  

Energy stocks (XLE) have fallen since the December highs as the OPEC deal to cut production has not resulted in any real measurable cut that would impact prices. The move lower and the break of the $63.72 mark was negative for the sector and the short side remains in play with the stop now at the previous support of $63.70. Watching how the bounce in crude oil Friday impacts the stocks.

Volatility Index (VIX) This week was more interesting for the index jumping back to 15.5 on the selling Thursday and now focused on how investors respond today. VXX entry at $12.85 hit again and stop at $12.50 on the close. Manage this and let it unfold with the markets near-term.

The rotation is away from risk and embracing safety. The NASDAQ (QQQ) is at a decision point with support at $141 and semiconductors (SOXX) hold the key for the broader index. The triangle or wedge pattern on the chart is trading near support as well ($144.50). The S&P 500 index (SPY) broke $243.75 support on Friday on increased volume showing a negative setup for the index. It equally broke the uptrend line off the April low. The small-cap index (IWM) has broken support at the $139 level and broke the trendline off the December low. All of this is negative for the broad market indexes short term. Thus, the short side setup is in play heading into the new week of trading. The sectors above are all in similar situations with four now in confirmed short term downtrends on the reversals and break of support. The sellers are building momentum and this is a big negative overall.

Daily Scan Results:

FRIDAY’s Scans 8/18: Mixed reactions to the Thursday sell off. Major indexes are now testing the key support levels with some confirming the downside move. The weekend will give everyone time to regroup and determine their belief for the near-term at best. The longer term trends remain up, but the short term is driving emotions currently. Take the data and make decisions based on your strategy and not your emotions.

  • Crude Oil (USO/UCO) big bounce on Friday with crude gaining more than 3% on the day. This pushed the price back above $48 and invites upside opportunity with a follow through to the move.
  • Brazil (EWZ/BRZU) attempting to move higher in the uptrend. Need to clear $38.50 resistance and resume the move higher off the June low.
  • Emerging Markets (EEM/EDC) bounced back from Thursday’s selling and still remains in the current topping pattern.
  • Gasoline (UGA) following the move in crude was a leader on the day. TAN posted a positive move as well. Both need to follow through on the move higher.
  • Base Metals (DBB) bounce back from the Thursday selling as well. The vertical move still in play short term.

Key is how Monday and Tuesday unfold for the broad markets relative to support, emotions, volume, and breadth… for now, the sellers have momentum and the question is how much influence they will have to start the week.

The weekly scans show BRZU, ERY, LBJ, EDC, DBB, TZA, and LABD as positive upside moves… the downside is led by NAIL, WEAT, XRT, IEO, OIH, FCG, IYZ, and UNG.

THURSDAY’s Scans 8/17: Sellers show their muscle again with the downside move. This obviously dominated the scans with some key sectors and indexes break support. A follow through the day will be key to how this unfolds short term. Energy is the leader on the downside currently, but small caps are making a key move lower. Patience and a defined strategy are key to adding any downside positions.

  • Volatility Index (VXX/UVXY) hit the entry at $36.10. Stop the same price based on the close. How much does this accelerate is the key question and the answer we will watch.
  • Semiconductors (SOXX/SOXS) The sector is still in a consolidation range. The big move lower on Thursday caught my attention, but technically still needs to break down. Don’t assume anything let it unfold. Willing to add a partial position with a move above $28.45.
  • NASDAQ (QQQ/SQQQ) The downside setup is of interest for the broad index. $141.22 level is key support and a break offers a short side trade.
  • S&P 500 index (SPY/SPXS) downside break offers up short side trade opportunity. $40.30 was the entry level and watching how it unfolds today for trade.
  • Small Caps (IWM/TZA) broke $137.40 support again and the previous lows. The longer term trend line remains in play, but the short term downside is attractive on the current weakness. $16.78 entry. Willing to add to the positions at $18.30. Stop $16.

There are plenty of other setups on the short side… these offer the best opportunity relative to the risk/reward… my view. Watching FAZ, LABD, MYY, EDZ, and SRS. Patience and discipline are a must.

WEDNESDAY’s Scans 8/16: Buyers stepped in early again on hopes of the FOMC being more dovish to help stocks. The opposite was true and stocks close flat. The indecision from investors remains the norm with lower volume. Looking for some movement in reaction to the Fed stance on their balance sheet and a strong out look for the economy. Patience as it all unfolds.

  • Gold Miners (GDX/NUGT) back in play as the bounce in gold has a positive impact. The $33.21 level now in play on the upside and opportunity to add a position based on the move.
  • China (GXC/YINN) bounced on a weaker dollar and rising emerging markets. The bounce was positive in the longer term trend and watching how it unfolds near term. BIDU in flag pattern, BZUN breaking from flag pattern, and KWEB looking positive.
  • Brazil (EWZ/BRZU) back to the upside on the weaker dollar.
  • Base Metals (DBB) gap higher on the move in aluminum and copper.
  • Crude Oil (USO/SCO) bottom reversal for the short side of the oil trade. Entry at $39 is playing out with the next opportunity a move above the $40.80 mark yesterday. Looking for follow through on the short side trade.

Weaker dollar, lower interest rates impacting the rotation currently thanks to the Fed. Watching how it unfolds and adding the resulting trades.

TUESDAY’s Scans 8/15: Flat trading day does nothing to help the cause of the move higher on Monday. Still watching how this unfolds on the reversal. No short trades followed through on Monday and no upside trades followed through on Tuesday. Willing to watch and see how this unfolds with the FOMC meeting today.

  • Small Caps (IWM/TZA) erased part of the gains from Monday and still look weak from my perspective. Watching the short side opportunity.
  • Financials (XLF/FAS) looking for the upside to follow through short term on the move started in June.
  • Semiconductors (SOXX/SOXL) stuck in the range and looking for direction as well as conviction from investors.
  • Energy (XLE/XRY) downside remains in control despite the bounce. The short side shows move resolve as less investors believe in the move in oil prices. Weakness in crude the last few days is not helping the cause.
  • Retail (XRT/XLY) downside gaining control as the retail stocks drop. KSS, JWN, DG, DDS and others are not helping the upside cry… short side winning.

The lines between winners and losers is getting clearer, but the volume remains a challenge for both. Investors are dabbling in trades, but neither seems convinced the direction is clear. Take what the market gives based on your strategy and approach… avoid the news trades and focus on your discipline.

MONDAY’s Scans 8/14: All is well as the bounce off the lows shows the buyers are still willing to step in and own stocks. Don’t let the volume worry you… don’t let the lack of interest in growth stocks concern you… just keep listening to the talking heads and believe in the dream of unlimited upside in stocks. Taking the move for what it was… a bounce on low volume and looking for the follow through and opportunities that result in either direction.

  • All were up and the moves need to validate. Until they do we go with the indecision mode the markets have been in for the last several weeks and months.

Sector Rotation:

  • XLB – Materials moved lower off the July high and have managed to test support at the $53.50 level. The topping pattern is negative and a break of this level will open th short side trade opportunity. Patience as this all unfolds near term.
  • XLU – Utilities bounce off support at the $50.88 level and have followed through nicely the six weeks to move to new highs. Entry $52.25, Stop $53.25 (adjusted). Money is rotating to the sector as money heads towards safety. 
  • IYZ – Telecom has become more of a trading sector than the buy and hold historically. The volatility has increased and thus swing trading works better. Watching for now how this unfolds as sector moved back above the $31.35 mark. Entry $31.60, Stop $30.90. Some buying? Some selling? The big drop last Thursday is the key now… follow through hits our stop and the short side trade returns.
  • XLP – Consumer Staples moved lower on economic worries and higher interest rates. The Fed talks last week to stand still on rates put a positive reversal in play. Watching for a move above $55 to get my interest near term. Moving sideways for now and looking for a directional decision.
  • XLI – Industrials moved sideways the last two months and now breaking lower along with the broad markets. The long term uptrend remains in play and we will watch how the decline below the $67.50 mark impacts the current trend.
  • XLE – Energy is a house of cards with volatility in the commodity and news surrounding the production and supply data. There is still the issue of uncertainty towards the stocks. Broke $63.70 support and renewed the selling and short side of the trade.
  • XLV – Healthcare has been a big rollercoaster ride with a promise to reform healthcare and then the failure to follow through. Now the support at $78.50 is broken and the downside showing strength. Watching how this unfolds Monday with a follow through to the move lower in limbo. 
  • XLK – Technology moved lower, but the uptrend remains in place. The semiconductors are weaker putting pressure on the sector overall. The sideways activity is testing the $56.75 support currently and the level to watch. Entry $48.50. Stop $56 (adjusted). Let the decision unfolds with a stop in place this week.
  • XLF – Financials pushed lower on worries about interest rates, the Fed, and N. Korea. The retest of support at the $24.64 level is a concern for the short term uptrend. Entry $23.85, Stop $24.50 (adjusted). Patient for now. Let the direction unfolds and manage your money accordingly.
  • XLY – Discretionary Consumer lower to support at the $88.50 level with retail earnings pushing stocks lower. Entry $83.50. Stop $88.50 (adjusted). Some major reversals in stocks as you scan the sector overall… watching how the downside plays out to start the week.
  • RWR – REITs reacting to the current uncertainty around the Fed and the dollar. The longer term view clearly shows the trading range and the opportunity to collect the dividend while investors continue to make up their collective minds on direction. We added the position in December on the move off the lows and continue to babysit the dividend of 4%. Watching how the move below $91.77 support plays out on Monday.

Sellers are taking the near term directional control and impacting the outlook for the sectors short term. Four have negative short term trend reversals and if the rotation to safety continues this will have a negative impact on the charts short term. Watching how it unfolds to start the week.

FINAL NOTES:

Investors are nervous plain and simple. Volume is favoring the sell side. Data is positive overall for earnings and the winners are being rewarded. Money is rotating to safety. This remains a market in transition and with that comes opportunities. Those are outlined above in the scans and sector notes. We will proceed with caution and patience taking what comes our way and fits our strategy for investing both short and long term.

ONE DAY at a time is the key for now. Take a longer term view for your overall portfolio and manage the risk of your short term trades accordingly. See you next week.

“Vision without action is a daydream… Action without vision is a nightmare.” Japanese Proverb.

Volatility rises on worries as stocks decline

By | Jims Notes, Outlook, Research Post | No Comments

OUTLOOK: Week of August 14th

In the face of uncertainty, all you need to do is give investors a reason to sell… North Korea did exactly that last week. ICBM nuclear capable missiles gave everyone reason for concern, but more importantly, it added to the uncertainty in the global outlook. The major indexes closed the week lower with the small caps leading the downside. The test of the 200 DMA is a negative technically and one thing to watch as we start the new week of trading. Emotions picked up as the VIX index spikes above 16 and settling at the 15.5 mark on Friday. The reaction to the news will settle and then the reality of the current situation will determine the direction and attitude for investors. We will take it one day at a time and look for the opportunities in the outcome.

Six sectors closed Friday on the upside as telecom (IYZ) and technology (XLK) led the upside move. The bounce from the selling on Friday was positive, but the moves showed caution as well. The VIX index remained elevated at 15.5 showing anxiety still in play. The downside was led by REITs (RWR) and energy (XLE) as money continues to look for safety. The bounce on Friday came on light volume and no breadth. This leaves the direction in limbo and with plenty of questions. Do the traders allow the market to continue downward or do they buy the test? The key is to be patient and see how it unfolds moving into the new week of trading. The S&P 500 index closed up 3.1 points on the Friday at 2441 and remained below the 50 DMA. The move also broke the consolidation pattern for a short term short trade signal. Friday left a doji candle adding to the interest for how Monday will unfold. The long term uptrend is still in play but now comes into question. The biggest movers in the index on Friday were TRIP (break from cup pattern at the bottom), VRTX (bounce in a test of the gap higher), LRCX (bounce off support test), ADSK (bounce off support test), and JBHT (moved above resistance). The downside leadership came from IYR, NVDA, MYL, AES, KIM, and KSS. Each showing a continued reaction to the news on Thursday. Gold (GLD) moved through the $120.45 resistance tested lower only to move higher again on news. Gold has taken on a safety role and benefitted from the fear factor. The dollar (UDN) continues to struggle with the dovish outlook from the Fed and their shift to liquidate their balance sheet. The emerging markets (EEM) gapped lower on the political unrest with N. Korea. Broke $43.50 support and hit exit signal for short term positions. The Volatility Index (VIX) closed at 15.5 holding the move higher on the worries present Thursday over N. Korea. The VXX position spiked higher as well on the news and now you adjust your stop and see how it unfolds. Manage your risk and stay focused on the horizon, not the rear-view mirror.

The scans for Friday showed a bounce reaction in some sector while others continued the negative sentiment. The Volatility Index (VXX) again raising plenty of questions as it holds at the 15.5 level showing investor sentiment shift for the day. Telecom and technology bounced on the day, but have plenty of work to do to repair the damage. The consumer is lagging again with retail (XRT) testing lower. Biotech (IBB) bounced slightly after breaking support at the $309 level. Brazil (EWZ) is holding support after some selling early in the week. Energy (XLE) headed lower on the week and continues show little confidence in oil prices rising. Semiconductors (SOXX) are showing a negative pattern with a double top on the weekly charts. Gold miners (GDX) made a positive move along with gold (GLD) with money rotating to where it believes it will be treated the best in light of the speculation. Treasury bonds (TLT) pushed higher as money accelerated the rotation towards safety. Watching how this unfolds near term as it impacts the current trends with reversals, breaks of support levels and moving averages on higher volume… all impacting the technical read for the market. Patience in how you approach this market both short and long term. Let the news settle and the reality develop for the current trends. There are opportunities in all of this activity both long and short various sectors.

The news for the week came from North Korea. The reaction to the news is still in play. It is important to note that investors were already talking about the overbought situation in the markets overall. The news gives them a reason to act. How long and how much they react is a matter of belief near term. Therein lies the challenge for the coming week. Watch for the volume and breadth of moves up or down. Know where money is rotating to and from. The current moves towards gold, bonds, and cash are not a good indication for the near term moves in the market. This can change as we start the week and it is where we will focus our efforts and research.  Two charts that validate the rotation last week are IWM -4% the last two weeks and leading the move lower. The move to the 200 DMA is a negative and a break lower would be a bad indication overall. This movement is worth our attention as the new week unfolds. The undercurrent of worry remains along with some speculation on where the markets go near term. The VIX index moved off the lowest point reacting to the N. Korea news spiking above 16 and closing at 15.5. There is plenty to ponder both positive and negative going forward. Earnings have helped with individual stocks, but not the sectors. As seen in tracking the S&P 500 leadership the biggest moves have come from positive earnings. Volume was higher for the week as investor reacts to the news. Data is still not driving… news and speculation are. The key word remains to be PATIENCE. Not something many traders like. We all want to believe we can see forward, but the reality is we can only see today. Thus, we must do what our strategy tells us to do today and tomorrow will take care of itself. Hard lessons to learn as our analytical brain wants us to believe we have the solution and can predict the future. Keep your stops in place and your eyes focused on the horizon taking what the market gives.

KEY, INDICATORS/SECTORS TO WATCH:

Biotech (IBB) remains a sector of speculation… The speculation from Washington relative to what will happen with drug prices and healthcare is back with traders exiting the sector and looking for more interesting ground. The Senate failed to pass healthcare reform and can see the impact. No positions. The break of support at $309 mark offered a short entry. The sector was already under distress from the inability to pass a reform bill… this only gives reason to sell.LABD hit entry at the $7 level.

REITs (IYR) had been lagging in response to interest rate worries related to the Fed promise to hike rates multiple times this year. The sector tested the $76 level of support and bounced back to resistance and tested, and bounced, and… We continue to focus on managing our risk and collecting our dividend as this all unfolds. This is a growth and dividend holding with a 4.2% dividend currently. Entry at $75.75. Stop $76.25 (adjusted).

Treasury yields (TNX) moved back to the 2.4% level as the Fed talked of raising interest rates. The move to 2.2% came on the comments from Ms. Yellen and the Fed taking on a more dovish role towards rates. Just when you thought it was safe to go back into the water… the Fed changes its mind. TLT rallied again this week on worries over N. Korea adding to the list of worries. $124.10 entry, stop $122. Yields continue to deline helping the upside for bonds this week.

Gold (GLD) Gold remains in a long-term uptrend with a broad trading range in play the last five months. The volatility within the trend is speculation and news driving money. The selling was more of the speculation, just as the current buying is on speculation the dollar and the Fed will remain neutral. Bounced off support at the $114 level, cleared resistance at the $117.38 mark (entry) and heading towards the $123 target. Stop $119 (adjusted). Break higher continues the uptrend on uncertainty in North Korea.

Crude Oil has become a story of what if’s more than what happened or is happening. Supply remains the overwhelming issue, but the weaker dollar is having some influence near term. The move above $48 this week brought plenty of speculation and the bottom reversal on the double bottom pattern is in full bloom. Entry hit at $47.50, stop $44.35. Taking what the commodity gives and not asking any questions… purely managed as a technical trade. Positive news on the global supply data helping the short term outlook. 

Energy stocks (XLE) have fallen since the December highs as the OPEC deal to cut production has not resulted in any real measurable cut that would impact prices. The move lower and test of the $63.70 level kept the downside in question… but, the bounce on the rise in crude only adds to the confusion. More selling to moves back towards support at the $63.72 mark. No buyers showing interest.

Volatility Index (VIX) This week was more interesting for the index closing at 15.5 showing a spike in activity as investor worries over North Korea prompted a response. VXX position plays out well and adjusting stop to $12.75.

The sectors were rotating again last week as money moves towards cash and bonds. We have to take it one day at a time and see how it all unfolds. The S&P 500 index tested the 50 DMA and the Small Caps moved to the 200 DMA. The rotation in response to the N. Korea bantering is where to watch as money shifted to gold and short trades… News and speculation are tough trades. They do provide opportunities as the speculation either validates or invalidates reality. Our job is to let the resulting opportunities develop… have a strategy for trading or investing in them… and then managing the process based on our belief and disciplined approach. Sounds simple? It is except for the six inches between our ears that process what we hear as it impacts our beliefs. Have a strategy for every position and trade/invest according to the strategy… don’t let the news or others sway you from the task at hand.

Daily Scan Results:

FRIDAY’s Scans 8/12: Some buying but not enough to convince anyone Thursday was an overreaction. Watching how money rotates and to where it rotates. Thus far we don’t have enough clarity in the activity to determine the direction of choice. Patience as it unfolds.

  • VIX index (VXX/UVXY) positive moves in the index continues showing anxiety in place for investors. Adjust your stops and watch how it unfolds on Monday.
  • Semiconductors (SOXX/SOXS) the sector remains one big question mark with the sellers holding the upper hand currently. The weekly chart pattern is of interest with a double top showing.
  • Small Caps (IWM/TZA) short side interest in play as the index tests the 200 DMA. A break lower keeps the short trade in play… a bounce needs to show some follow through and conviction.
  • Financials (XLF/FAZ) the downside pressure is showing in the reaction to the news, weaker dollar and lower interest rates. Stops raised.
  • REITs (IYR/SRS) short side breaks above the $31.55 resistance and offers trading opportunity. Watching how this sector unfolds even with interest rates declining.

JJU, TAN, ULE, NUGT, SMN made moves of interest on the upside. Downside is building some momentum and watching how this unfolds next week.

THURSDAY’s Scans 8/11: Selling present again and holds this time as the worries over events move the anxiety level higher. Reality vs speculation is the challenge we now face as the selling started in earnest and now we see how it plays out near term.

  • Volatility Index (VXX/UVXY) rally in the anxiety as the news rattles investor confidence. The spike to 16 set the tone for the trade signaled on Tuesday. Raise your stop to $12.75 and let this unfold.
  • Biotech (IBB/LABD) short side signal hit on the move lower with the sector under pressure already. $6.92 entry and stop at $6.60 (adjust to $6.92 if positive tones return to broad markets). If negative sentiment continues this will move lower.
  • Natural Gas (UNG/UGAZ) upside continues with the commodity moving above $6.46 resistance. $6.92 is level to clear for now.
  • Small Cap (IWM/TZA) hit the $16.90 entry level for short trade and that would be the stop currently as this unfolds as a trade opportunity.
  • Financials (XLF/FAZ) selling in the sector jumps and now setting up downside trade if this follows through. $16.45 level is key to move above. Patience.

Everyone has been taking valuation of the markets and the political issues with N. Korea are only providing a reason to sell… not the reason. Let the air come out of this balloon before running down the street screaming sell everything. First is the reaction to the news, then comes the rationale to the selling, and then comes reality. It is reality where the opportunity lies. Patience is key to letting this unfold and the opportunities to arise.

WEDNESDAY’s Scans 8/10: Attempt to establish downside activity but the buyers stepped in to keep the indexes at par on the day.

  • Natural Gas (UNG) positive on the supply data. An attempt on the bottom reversal in place. Watching for follow through and entry at the $6.60 mark.
  • Gold Miners (GDX/NUGT) bounced with the price of gold following through on a break above the $120 level.
  • Small Caps (IWM/TZA) downside made move and looking for it to hold support near at $139 and broke on the close Wednesday. Short trade setup.
  • S&P 500 index (SPY) topping pattern in play. NASDAQ (QQQ) topping pattern in play. Dow (DIA) Testing the new highs. The parts make up the whole, but the whole determines the direction. Watching how all three unfold near term.
  • Watching how the leadership unfolds… rotation? hot money? trends? All offer opportunities and we have to be patient in letting them develop.

TUESDAY’s Scans 8/9: downside day, but not dominate relative to the selling.

  • Utilities (XLU/UPW) leading the upside move with a solid trend back towards the June highs.
  • Volatility Index (VXX/UVXY) anxiety begins! The jump in nerves showed in the index and stocks. Move above $11 worth our attention and trading opportunity at $11.70 entry.
  • Biotech (IBB/LABD) watching how the downside unfolds… or bounce off support? Plenty of attention still in the sector short term.
  • China (GXC/YINN) the upside gap is a continuation of the uptrend. Positive run for the country ETF and the individual stocks… see Monday notes.
  • Base Metals (DBB) vertical move upside as the metals move with copper, aluminum and other gaining on the day.

Some other moves to watch TZA, SLV, TMV, UGAZ, SCO, and SRS.

MONDAY’s Scans (8/8): a positive day for the indexes and the leadership, but no real shifts in the overall trend. Looking for some leadership in the data, but that continues to be lackluster as the economy drags forward. Despite all the whining and complaining the market continues to inch higher and we progress with it albeit with our stops in place.

  • Semiconductors (SOXX/SOXL) bounce from the recent test and remain challenged on the upside… individual opportunities look better, but the risk is also higher in the current environment. ON, LRCX, NVDA, TSM, and MCHP offer positive looks.
  • Brazil (EWZ/BRZU) showing positive upside again in the current uptrend.
  • Energy (XLE/ERY) downside weakness showing again as the oil services (OIH) stocks show more weakness.
  • China (GXC) holding the uptrend with KWEB, SINA, BABA, HTHT, BZUN and other pushing higher in the current uptrend.
  • Technology (XLK/TECL) upside in play with a move to the top of the consolidation pattern. Worth digging into the sector for the leaders versus the whole. AAPL, NVDA and MCHP are few on the move.

Still proceeding with caution as this current environment unfolds. LBJ, DBB, EDC, TAN and KOL all in positive uptrends as well.

 

Sector Rotation:

  • XLB – Materials moved higher pushing above the $50 level and moving toward 2015 high. Hit the entry at $48, Stop $54.50 (STOP HIT). The move lower is negative and short interest is growing.
  • XLU – Utilities bounce off support at the $50.88 level and have followed through nicely the last month. Entry $52.25, Stop $51. Moved to the previous highs and testing currently. 
  • IYZ – Telecom has become more of a trading sector than the buy and hold historically. The volatility has increased and thus swing trading works better. Watching for now how this unfolds as sector moved back above the $31.35 mark. Entry $31.60, Stop $30.90. Some buying? Some selling? Watching the $32.65 mark for the upside continuation.
  • XLP – Consumer Staples moved lower on economic worries and higher interest rates. The Fed talks last week to stand still on rates put a positive reversal in play. Watching for a move above $55 to get my interest near term. Moving sideways for now and looking for a directional decision.
  • XLI – Industrials – remains in a positive uptrend since the break higher in November. Entry $67, Stop $66. The positive trend was questioned with the downside move. An uptrend in place as the money flow remains positive but watching how it starts the week. Moved below $67.93 support and watching.
  • XLE – Energy is a house of cards with volatility in the commodity and news surrounding the production and supply data. There is still the issue of uncertainty towards the stocks. Held $63.70 support and bounced as the dollar weakness helps the price of crude. To many question marks for now to take any positions. The retest of support the last two weeks is showing the lack of interest from investors.
  • XLV – Healthcare hit the low and established a pivot reversal relative to rumors around the election… then the election… attempted upside move and trend reversal… but, failed to hold the move. The second attempt with double bottom worked itself into a break above the $71.78 resistance level. Entry at $70 as cleared resistance. Stop at $78.50 (HIT STOP). The selling advances and the uncertainty in play. The break of support is negative as we watch how this unfolds short term.
  • XLK – Technology moved lower, but the uptrend remains in place. The semiconductors are weaker putting pressure on the sector overall. The sideways activity is testing the $56.75 support currently and the level to watch. Entry $48.50. Stop $56 (adjusted). Let the decision unfolds with a stop in place this week. 
  • XLF – Financials pushed lower on worries about interest rates, the Fed, and now N. Korea. The retest of support at the $24.64 level is a concern for the short term uptrend. Entry $23.85, Stop $24.50 (adjusted). Patient for now. Let the direction unfolds and manage your money accordingly.
  • XLY – Discretionary Consumer broke above resistance with a positive trek higher and has now moved back to key support levels. Entry $83.50. Stop $88.50 (adjusted). Retail has been negative for the sector overall and we continue to manage our stops and let it unfold.
  • RWR – REITs reacting to the current uncertainty around the Fed and positive attitude towards risk as money made some rotation. The longer term view clearly shows the trading range and the opportunity to collect the dividend while investors continue to make up their collective minds on direction. We added the position in December on the move off the lows and continue to babysit the dividend of 4%. Tested the bottom end of the range on worries as we manage the position and let it all unfold.

Markets react to the North Korea banter on missiles. The challenge is bigger than this news… investors are worried about the current valuations and projected growth looking forward. There is little to cheer about the short term. The weaker dollar favors the multinationals and commodities… lower interest rates favors bonds… and negative sentiment favors the short side trades. Watching how the week unfolds with the rise in volatility in play.

FINAL NOTES:

Investors are nervous plain and simple. Volume is favoring the sell side. Data is positive overall for earnings and the winners are being rewarded. Money is rotating to safety. This remains a market in transition and with that comes opportunities. Those are outlined above in the scans and sector notes. We will proceed with caution and patience taking what comes our way and fits our strategy for investing both short and long term.

ONE DAY at a time is the key for now. Take a longer term view for your overall portfolio and manage the risk of your short term trades accordingly. See you next week.

“Vision without action is a daydream… Action without vision is a nightmare.” Japanese Proverb.

Jobs Report brings buyers

By | Jims Notes, Outlook, Research Post | No Comments

OUTLOOK: Week of August 7th

Is the love affair with growth stocks over? Small caps (IWM) moved to support to test the uptrend, Mid caps (MDY) tested lower as well, and growth stocks overall (VUG) are testing on the chart. The S&P 500 index (SPY) chart looks very similar while the Dow (DIA) is moving higher showing a rotation to value stocks. It is all a matter of perception as investors continue to struggle with the outlook for growth. The unemployment data Friday showed lower numbers again. Are more people finding jobs or are fewer people looking? It is a combination, but the reality is money moving to safer ground.

Eight sectors ended Friday on the upside with telecom (IYZ) and financials (XLF) leading the upside. Give the credit to the jobs report which put investors in a positive mood for the day. The downside was led by utilities (XLU) and consumer staples (XLP). The move higher in yields pushed both lower on the day, but they remain in a positive trend. The S&P 500 index closed 4.6 points at 2476 and still near the highs and a consolidation wedge is present on the chart. The biggest movers on Friday were NFX (bottom reversal setup), CF (Moved to the top of the trading range Thursday, broke higher on Friday), TRIP (top of the bottoming range… breakout setup), DVN (double bottom breakout setup), and MAC (bottoming trading range). The downside leadership came from VIAB, FLR, SRCL, MYL and DISCK. Each confirmed downside break in patterns and some short opportunities. Gold (GLD) moved through the $120.45 resistance but tested lower on the jobs report Friday. The dollar (UDN) moved higher finally following a decline on the dovish outlook from the Fed and their shift to liquidate their balance sheet. The emerging markets (EEM) gapped higher from the trading range to new high and holding a move sideways. The Volatility Index (VIX) closed at 10 with intraday activity but nothing to change the outlook from investors. Watching how it unfolds and what opportunities it presents if it continues higher. Manage your risk and stay focused on the horizon, not the rear-view mirror.

The scans for Friday were the opposite of Thursday with positive moves across the board to show some life in the current uptrend. more on the negative side and offered some interesting setups in stocks. Telecom (IYZ) bounced back from testing earlier in the week and is at the $32.65 resistance. Financials (XLF) posted a positive move to continue the uptrend for the sector. Energy stocks bounced from selling with XOP posting a positive day. Crude (USO) was higher on the day and solar (TAN) continues to post positive moves in the current uptrend.  The small caps (IWM) bounced off support with a test of $139… a break makes the downside interesting as well as a reversal back to the previous highs… watching how it unfolds. Greece (GREK), Brazil (BRZU) and Latin America (LBJ) all positive for the country ETFs despite the test to end the week. Other moves of interest from our weekend scans… IBB, GDX, TLT, IYZ, KOL, IEO, XRT, ITB, and FCG. The challenge remains a lack of conviction about direction with some rotation in place and some pattern breaks. Taking what the market gives and watching for trends, reversals, support, and volume… they will lead you to what is moving and the best opportunities for trades currently.

The was jobs report put a positive end to an otherwise negative week. The shift on the charts is to a sideways movement of consolidation with value or safety driving the direction. What does all of that mean? Simply put nerves are rising about the seven-year uptrend for the markets. Data isn’t supporting the moves as the economy shows modest to no growth overall. The unemployment data on the surface looks great, but income and amounts of people leaving the job force raise plenty of questions. Two charts that validate the rotation last week are IWM -1.3% and DIA +1.2%. This movement is worth our attention as the new week unfolds. Crude oil remains the leader, but energy (XLE) has not followed the lead. The move in IEO and XOP on Friday got my attention, but they will need to follow through to gain any traction. The undercurrent of worry remains along with some speculation on where the markets go near term. The VIX index moved off the lowest point reacting to the chatter about Fed activity impacting stocks looking forward. The move lower on Friday reflects the lack of anxiety present in the markets currently. There is plenty to ponder both positive and negative going forward. Earnings are helping with individual stocks, but not the sectors. As seen in tracking the S&P 500 leadership the biggest moves have come from positive earnings. Volume was weak for the week as investor enthusiasm for risk fades. Data is still not driving… news and speculation are. The key word remains to be PATIENCE. Not something many traders like. We all want to believe we can see forward, but the reality is we can only see today. Thus, we must do what our strategy tells us to do today and tomorrow will take care of itself. Hard lessons to learn as our analytical brain wants us to believe we have the solution and can predict the future. Keep your stops in place and your eyes focused on the horizon taking what the market gives.

KEY, INDICATORS/SECTORS TO WATCH:

Biotech (IBB) remains a sector of speculation… The speculation from Washington relative to what will happen with drug prices and healthcare is back with traders exiting the sector and looking for more interesting ground. The Senate failed to pass healthcare reform and can see the impact. No positions as our stops were hit and we watch to see how the current test lower sets up… short trades are starting to look attractive.

REITs (IYR) had been lagging in response to interest rate worries related to the Fed promise to hike rates multiple times this year. The sector tested the $76 level of support and bounced back to resistance and tested, and bounced… The shift in outlook for the Fed holding rates steady for now has shifted money back to the REITs. We continue to focus on managing our risk and collecting our dividend as this all unfolds. This is a growth and dividend holding with a 4.2% dividend currently. Entry at $75.75. Stop $76.25 (adjusted).

Treasury yields (TNX) moved back to the 2.4% level as the Fed talked of raising interest rates. The move to 2.2% came on the comments from Ms. Yellen and the Fed taking on a more dovish role towards rates. Just when you thought it was safe to go back into the water… the Fed changes its mind. TLT rallied on the comments and watching for the opportunity to unfold on a follow through. $124.10 entry, stop $122. TLT moved back to the July highs and tested to end the week… positive for now.

Gold (GLD) Gold remains in a long-term uptrend with a broad trading range in play the last five months. The volatility within the trend is speculation and news driving money. The selling was more of the speculation, just as the current buying is on speculation the dollar and the Fed will remain neutral. Bounced off support at the $114 level, cleared resistance at the $117.38 mark (entry) and heading towards the $120 target (hit last week). Stop $117. Negative move on the positive jobs reports Friday… watching this week.

Crude Oil has become a story of what if’s more than what happened or is happening. Supply remains the overwhelming issue, but the weaker dollar is having some influence near term. The move above $48 this week brought plenty of speculation and the bottom reversal on the double bottom pattern is in full bloom. Entry hit at $47.50, stop $44.35. Taking what the commodity gives and not asking any questions… purely managed as a technical trade.

Energy stocks (XLE) have fallen since the December highs as the OPEC deal to cut production has not resulted in any real measurable cut that would impact prices. The move lower and test of the $63.70 level kept the downside in question… but, the bounce on the rise in crude only adds to the confusion. $66.25 level to watch for opportunity. Close above it and looking for follow through and entry at $67. Need some volume and conviction from investors.

Volatility Index (VIX) This week was more interesting for the index closing at 10 showing some activity, but not enough to rock stocks. The Fed comments following the FOMC meeting brings some anxiety and with it, we will watch what transpires short term.

The sectors were rotating again last week as money moves towards value stocks and bonds. We have to take it one day at a time and see how it all unfolds. The S&P 500 and Dow indexes are testing the moves to new highs and the NASDAQ is a cause for concern following its positive move higher. Our job is to let the opportunities develop… have a strategy for trading or investing in them… and then managing the process based on our belief and disciplined approach. Sounds simple? It is except for the six inches between our ears that process what we hear as it impacts our beliefs. Have a strategy for every position and trade/invest according to the strategy… don’t let the news or others sway you from the task at hand.

Daily Scan Results:

FRIDAY’s Scans (8/4): A positive day with the jobs report helping push stocks to the upside. We will take it in stride and see how the upside unfolds to start the new week. Taking it one day at a time as the future unfolds.

  • Biotech (IBB/LABU) bounced off support and watching for a follow through to the move and possible bottom reversal short term.
  • Gold Miners (GDX/DUST) negative response to the economic data and sold lower… watching how this unfolds relative to a short trade.
  • Homebuilders (ITB/NAIL0 showing positive signs again with a new high in the current uptrend. BLDR, IBP and BLD show positive breaks upside in the scan of the sector.
  • Crude Oil (USO/UCO) positive move testing with a wedge pattern at the top of the current uptrend. Watching how this unfolds in the coming week. FCG, IEO, XOP all showed possible bottom reversals?
  • Financials (XLF/FAS) upside break and continuation of the uptrend in play. Large banks (KBE) and insurance leading the sector higher (KIE).

Positive end to a lazy week for stocks… need the follow through on Monday if we are to see improvements above and across the sectors.

THURSDAY’s Scans (8/3): Not the best of days for the broad markets. The downside was modest, but the internals are a concern. Small and mid caps are showing weakness near term with a test of support. The most common pattern in the scans are topping patterns as we test the first levels of support.

  • Semiconductors (SOXX/SOXS) confirmed the move below the 50 DMA and setting up a downside opportunity.
  • Treasury Bonds (TLT/TMF) solid upside move as yields test support at 2.2%. Break higher positive for our position in the bond.
  • Biotech (IBB/LABD) downside looking positive as the bottom reversal in the short ETF shows a positive pattern.
  • Volatility Index (VXX/UVXY) upside possibility as the nervous talk rises.
  • Solar (TAN) upside still in play as buyers continue to like the sector. Leadership worth digging into.

Movement is still slow and questionable as it relates to the broad markets. Watching how this all unfolds near term. Patience is key.

WEDNESDAY’s Scans (8/2): Some positives and some negatives developing on the day… another mixed review for stocks overall. There was little activity among the sectors that changed anything. The words caution and patience remain my focus.

  • Brazil (EWZ/BRZU) the break above resistance at $33.51 hit the entry point and the follow through the last three days have been positive for the country ETF.
  • Small Caps (IWM/TZA) downside move is worthy of note. Technically it moved to the bottom of the current range, but the sentiment towards the growth sectors is shifting on the charts.
  • Semiconductors (SOXX/SOXS) showing signs of selling as moves below the 50 DMA and sentiment towards the sector mirrors the small caps relative to growth stocks. Watching how this unfolds for possible short trade.
  • REITs (IYR/SRS) short side showed some muscle, but still in the uptrend and within the trading range. Watching for investors response moving forward. Uptrend still the bias.
  • Technology (XLK/TECL) upside showed positive signs for the sector overall despite the move in semis. AAPL was the big mover in the sector accounting for the bulk of the positive move overall.

Caution, patience and discipline define our approach for the near term.

TUESDAY’s Scans (8/1): a positive day as money flow higher to start the month. Plenty of questions and looking for the leadership.

  • Financials (XLF/FAS) posted positive upside and attempting to break from the current pattern again. Insurance (KIE) and large banks leading the upside move. Sum of the parts makes up the whole. Look for the leaders.
  • China (GXC/YINN) upside still in play and stops need to be adjusted to $93.50. HTHT, CTRP, BZUN, BABA, and KWEB leading higher.
  • Apple (AAPL) leading the upside charge overnight on the news around iPhone 8. Watch for break above $154. XLK will benefit as well as the QQQ.
  • Biotech (IBB/LABD) break lower as $319.57 penetrated and looking at how the downside plays out near term.
  • Europe (IEV/EURL) leading upside witha break from the consolidation pattern. Watching for the follow through on the move.

Overall some positives on Tuesday and the need to follow through is key… that comes with a rational reason for investors to put more money at risk near term. Watching for the rational reason…

MONDAY’s Scans (7/31): end of the month and no changes to the lack of activity. Watching as money rotates to crude, Europe and other areas of interest. I don’t like what the current activity and watching for the opportunities in the juggling near term.

  • Crude and energy sector continues higher UCO, UGA, TAN, and others move higher. The energy stocks (XLE) are still lagging the move. Natural gas (UNG) falls more than 4% as the weakest link in the energy complex.
  • Brazil (EWZ/BRZU) breaks above the $33.50 level to show a positive move on the upside.
  • Semiconductors (SOXX/SOXS) setting up a downside trade with a break of support and the 50 DMA… patience as it unfolds.
  • Europe (IEV/EURL) upside looks attractive still in the country ETF. Euro is gaining on the weaker dollar and thus far the ECB has balanced the easy money program for a struggling economic picture.
  • China (FXI/YINN) positive upside continues for the country ETF and positive outlook on weaker dollar.

Overall not pretty, but not exactly ugly either. Watching how all the back and forth unfolds and if the upside trend continues. Stops in place and take what the market offers.

 

Sector Rotation:

  • XLB – Materials moved higher pushing above the $50 level and moving toward 2015 high. Hit the entry at $48, Stop $54.50 (STOP HIT). Moved to a new high clearing the $54 mark. Still testing support at $54 and watching how it unfolds.
  • XLU – Utilities bounce off support at the $50.88 level and have followed through nicely the last month. Entry $52.25, Stop $51. 
  • IYZ – Telecom has become more of a trading sector than the buy and hold historically. The volatility has increased and thus swing trading works better. Watching for now how this unfolds as sector moved back above the $31.35 mark. Entry $31.60, Stop $30.90. Some buying? Watching the $32.65 mark for the upside continuation.
  • XLP – Consumer Staples moved lower on economic worries and higher interest rates. The Fed talks last week to stand still on rates put a positive reversal in play. Watching for a move above $55 to get my interest near term. Some help in the upside bounce off the low as earnings help the sector.
  • XLI – Industrials – remains in a positive uptrend since the break higher in November. Entry $67, Stop $66. The positive trend was questioned with the downside move. An uptrend in place as the money flow remains positive but watching how it starts the week.
  • XLE – Energy is a house of cards with volatility in the commodity and news surrounding the production and supply data. There is still the issue of uncertainty towards the stocks. Held $63.70 support and bounced as the dollar weakness helps the price of crude. To many question marks for now to take any positions. Scanning the sector is the only way to trade currently up or down. NFX, DVN, MRO, HES, and APA post positive moves to end the week.
  • XLV – Healthcare hit the low and established a pivot reversal relative to rumors around the election… then the election… attempted upside move and trend reversal… but, failed to hold the move. The second attempt with double bottom worked itself into a break above the $71.78 resistance level. Entry at $70 as cleared resistance. Stop at $78.50 (adjusted). Patience is key as this unfolds. Stops in place with the run higher and test. Trading in a range for now. 
  • XLK – Technology made the move back near the highs as the semiconductors bounce off support. Uptrend breaks short term and test of support at the $54.75 mark in play. Entry $48.50. Stop $56 (adjusted). Semiconductor weakness is the key to how this unfolds near term… they bounced and so did the sector. Give room for this trade to work upside. 
  • XLF – Financials pushed lower on earnings and Fed talk on interest rates. Earnings were good… not great, but worrisome in light of the Fed. That failed to impact the stocks and thus, the downside was in play. Entry $23.85, Stop $24.50 (adjusted). The break above that range was positive as the upside showed some strength, but still cautious as seen in the stalled move. Patient for now. Money rotation as investors look for value trades versus growth.
  • XLY – Discretionary Consumer broke above resistance with a positive trek higher. Entry $83.50. Stop $88.50 (adjusted). Had a positive break to new highs and some leadership from the sector to boot… testing that move at support as the topping pattern unfolds. Cleared $90 resistance and watching. 
  • RWR – REITs reacting to the current uncertainty around the Fed and positive attitude towards risk as money made some rotation. The longer term view clearly shows the trading range and the opportunity to collect the dividend while investors continue to make up their collective minds on direction. We added the position in December on the move off the lows and continue to babysit the dividend of 4%. Tested the bottom end of the range and bounced on the Fed comments and now has room to breathe again… patience is key. Traded sideways for the week.

Rotation is back as the Fed talk on interest rates, a weaker dollar, weaker economic picture, and earnings are all pushing money around. I am cautious and optimistic on some sectors and avoiding other. Interesting rumblings about the FOMC meeting as money rotates in response to the action taken. The weaker dollar favors the multinationals and commodities… watching how this will unfold near term. The negative movement in technology, biotech, and semiconductors got the attention of traders… watching how the week unfolds with the rise in volatility in play.

FINAL NOTES:

 

Investors are nervous plain and simple. Volume is lagging. Data is positive overall for earnings and the winners are being rewarded. Money is rotating to value versus growth. This remains a market in transition and with that comes opportunities. Those are outlined above in the scans and sector notes. We will proceed with caution and patience taking what comes our way and fits our strategy for investing both short and long term.

ONE DAY at a time is the key for now. Take a longer term view for your overall portfolio and manage the risk of your short term trades accordingly. See you next week.

“Vision without action is a daydream… Action without vision is a nightmare.” Japanese Proverb.