Flat Market on Low Volume

Monday, August 13th

Market end day essentially flat on low volume. The late day rally did push the indexes back near even on the day, but nothing really changed and investors seem to be content to wait for the stimulus money. Consumer Staples were flat, but Basic Materials were  down 0.6% as the metals and mining stocks fell on the day. Tomorrow is another day, but it looks like not much is going to happen until the Federal Reserve, the European Central Bank or China’s Reserve Bank announce something in the relative to how they will stimulate their respective economies.

Tomorrow will bring the Retail Sales data for July, the Producer Price Index (PPI) and Inventory data. They could have an impact on the psyche of the markets and are worthy of noting prior to the markets open.

Sectors below are updated based today’s activity.

1)  US Equities:

S&P 500 Sectors-to-Watch – The S&P 500 index continues to hold above at the 1400 level. The attempts to move to the previous highs near the 1420 mark are still in play, but there is resistance at the 1405 mark for now. The volume remains on the low end of the scale and the chart looks tired. That doesn’t mean the move higher is done, just at a decision point. Looking for a move towards the 1420 level on the S&P 500 or a test of support at the 1390 level or 1375 near term.

I am still holding out for a small pullback or correction in the broad indexes to justify the Fed stepping into the markets with any type of aggressive stimulus. Europe on the other hand will have to act soon to keep the wolves at bay, after all Draghi promised to do everything possible! By the way that means some action versus just talk.

The leadership remains in the energy, technology and consumer services sectors. Financials have attempted to put in a push higher, but they have struggled to follow through. The volatility has been subdued and the sentiment has shifted to the upside near term. The following sectors are showing worthy actions to trade or invest.

Telecom – The sector accelerated higher off the test lower at $22.10 on IYZ. Watch $23.60 support short term. The uptrend remains in play of the June 4th low. Watch for the move higher to continue as you manage your stops.

WATCH: IYZ – Entry – 22.40 – Hold and keep your stops at 23.40

Energy – holding the move higher and uptrend remains in play. Hold and manage the risk to see how this plays out short term. Oil services (OIH) remains in an uptrend leading the sector higher. Production and exploration (XOP) are breaking from consolidation and crude held near the $93 per barrel resistance. All remains positive for now, but watch the consolidation.

WATCH: XLE – Entry @ 69.25. Stop 70.40 (raise stop)

Financials – Holding above $14.80 move higher. The sideways activity continues as the volatility dies for now. The sector hit against resistance at $15 on lower volume. Look for a breakout to the upside is the markets are going higher short term. Raised stop to break even on the trade.

WATCH – XLF – Entry @ 14.55 – Stop 14.60

Healthcare – The sector continues to trade sideways. Hold positions and manage the risk. 50 day moving average is a good stop for now. Need some belief in the Obamacare program short term for the healthcare providers. Still hitting against the resistance at the $38.90 mark.

WATCH – XLV – Entry @ 38.10. Stop 50 DMA

Consumer Staples – The sector has been testing the move higher and continues moving sideways. Uptrend in play and looking for a steady move higher for now.

WATCH – XLP – Entry 35.31 – Stop 34.90

Consumer Services – The consumer has been spending less, but the retail data is showing some growth. This is still a stock picking sector overall. The leaders remain WMT, TGT, KSS, etc. Watch XRT for insight.

WATCH: XLY – Entry 44.50 – Stop 43.90

Basic Materials – broke above $35.75 resistance to continue the uptrend off the June bottom. Some weakness in the metals and mining stocks on Monday, but still holding up for now. Watch and manage the trade short term.

WATCH: XLB – Entry 35.80 – Stop 35.10

NASDAQ Index – Broke through the 3000 mark and holding. The upside momentum has been as a result of the technology stocks. The NASDAQ 100 index broke above resistance at the 2660 mark and found the upside move easy. The play continues to pan out for now – manage your risk.

WATCH: – QQQ Entry @ 65.25 Friday. Stop 65.20 (raised stop)

Small Cap Russell 2000 Index – The upside move off the July 30th bottom was positive, but we have now spent the last week trading sideways and testing the move. Took the entry on the move above $79.20 and through the downtrend line.

WATCH: IWM -Entry 79.60 – Stop – 78.30 Manage the risk.

Volatility Index – The index tested the low at 13.7 today. No volume on the indexes is pushing the volatility lower. Without some news or catalyst this could move further on the downside. SVXY continues to push higher. We stopped out last week, but the without some fear or anxiety short term the volatility is gone. Watch for ECB or the Fed to be the tie breaker for the VIX.

WATCH: SVXY – Watch for re-entry on pullback test.

2)  Currency:

Dollar – The dollar found support at the $22.55 mark on UUP. The risk for the dollar has been stimulus from the Fed and the ECB. Thus far no big changes, but volatility has picked up short term. Watch the downside play opportunity in the dollar if the strength in the euro moves higher.

WATCH: UDN – Entry $26.40. Hit Entry on Monday

3)  Fixed Income:

Treasury Bonds – The bond was moving lower as the yields started to rise. The move  to 2.73% on the thirty year bond and 1.64% on the ten year pushed prices lower. They have stalled currently, but the outlook is for rates to move higher still. TLT has moved lower with support at $124.60. The short play on bonds still the game for now.

WATCH: TBT – $14.80 entry. Stop $14.80 (stop on the close) Manage stop short term relative to volatility.

4)  Commodities: Topping formations and a cautionary tone for the asset class short term.

Agriculture – DBA broke the intial support Monday at $29.70. The next stop is $29. Watch as the stories around the drought are starting to get factual information and it could be a buy on the rumor, sell on the news event. Take profit if you have not already done so and see how it plays out short term.

Crude Oil – Moved higher to resistance at $23 and testing the move currently. Manage risk of the play and let it run.

WATCH: OIL – Entry 20.75 – Stop 21.90 (stop on the close)

Gasoline – Solid move off the test the last few weeks. The upside is still in play, but watch oil prices. Watching for a test short term on the steep move higher. Don’t be afraid to take some profit off the table short term.

WATCH: UGA – Entry at 52.75 – Stop 56.10 (raise stop)

Natural Gas –  negative cross on the short term of support and recommended a short position last week. Analyst have turned negative on the commodity as well keeping the downside in play.  Volume jumped today in the short ETF KOLD. Took the short ETF play on Friday in response to the negative selling.

WATCH: KOLD – Entry 27.15 watch and be patient. Raise stop to 26.75

Coal – The rotation has benefited from the selling in natural gas. However, it reversed off the run higher on Monday. The 2% sell off is worth watching short term. Still risk in the commodities short term, but watch to add to positions on the test of the move.

WATCH: KOL – Entry $25.20 – Stop $23

Resources and Commodities Strategy (BCX) breaking above resistance to continue higher at $13.92. Test and entry at $13.95. Stop at $13.65 for now on reversal.

5)  Global Markets: The global markets continue to respond to the ECB and Draghi’s promises to save the EU. The EAFE index has moved higher on the tough talk and lack of action by the ECB. Watch and manage any opportunities short term.

WATCH: EFA – Entry $50.50 – Stop $50.50.

China -Breaking above resistance and in position to make a solid upside move short term. I expect volatility along the way as China decides to push stimulus at the economic picture. Disappointing trade data with the US and impacting the outlook short term. Manage the stops.

WATCH: FXI – Entry $34.20 – Stop $34.20

Mexico – Moved against resistance again and still looking for a break out move on the index. Watch the volatility and manage the position.

WATCH: EWW – Entry $62.25 Friday. Stop $60.30

Singapore – moving back above the high at $13. I still like the country looking forward, but the near term weakness isn’t a positive. Manage the risk of the trade short term.

WATCH: EWS – Entry $12.70, Stop $13.10

Brazil Small Cap (BRF) channel top $37.50 with potential move higher. Posted on Wednesday for the opportunity in the global markets moving higher. The entry was hit at $37.60. Manage the trade and set stop at $36.80.

6)  Real Eestate (REITS) – The sector remains near the near term highs. Double top (IYR) set up on the downside short term. I like the outlook long term, but short term we remain on hold. Still scanning and looking for the best opportunities.

WATCH: IYR test of support at $63.60 to hold and then bounce.

7)  Global Fixed Income – The issues with sovereign debt in Europe keeps us out of the asset class currently. Emerging market bonds (EMB) are overbought and we have put this on a wait and see list short term as the bonds have pulled back to support at $118 short term. Watching for the opportunity.

WATCH: EMB – tested support at $118. Looking for entry opportunity.


What I am watching.  1) The miners (XME) are attempting to pick up some momentum on the bump higher in gold. Worth watching for a move through resistance$42.50. 2) Mortgage REITs (REM) bounced off the selling last week and heading back towards the previous high and remain in an uptrend.  3)  Consumer Discretionary is attempting to find an upside momentum. Watch FXD currently near $21 and breaking higher. 4)  Silver Miners (SIL) attempting to break above $19.50 resistance. 5)  Homebuilders (XHB) broke above $22 resistance and March highs. Testing the move higher and worth a trade if it follows through on upside. 6)  Dividend stocks continue to move higher as the favored asset class short term. PEY is set to break above the $9.50 top. 7) GDXJ – Junior Gold Minders ETF breaking above the $20.25 resistance… look for upside follow through trade.  8)  KOL – Market Vectors Coal ETF broke above the $24.90 resistance and looking for entry point near the $25.25 mark. 9)  Soft commodities may be getting soft on some profit taking. DBA watch for short opporutnity is the downside accelerates, or a entry point on a test to the move lower. 10)  High Yield Bonds (HYG) attempting to take out the high at $92.

Tomorrow’s Retail S

Watch and play according to your risk tolerance. Everyone has different trading styles and you have to find what works for you and your personality. Don’t put yourself in positions you don’t understand or take risk you can’t tolerate. Not every trade results in a profit, but controlling your downside risk determines your long term results. Trade smart.