Jim’s Market Notes for April 14th

MARKET STORIES:

JPM and other financials today will report earnings as we get to see how things have improved or deteriorated in the sector. BAC is tomorrow along with Wells Fargo. Earnings start to step up and that will take the focus away from other concerns for now. As seen in late day trading on Monday the jitters over earnings and interest rate hikes got the blame for the selling with the indexes closing in negative territory. Are the sellers going to take control? Not according to the volume on Monday, but there is plenty of time for this to play out moving forward.

Retail sales data out today. PPI numbers release and will be watched on concerns about inflation heating up. Business inventories after the open. Earnings with JP Morgan before the open today. Promises to be an interesting day as we get some insight into what investors will do relative to the facts versus speculation.

S&P 500 Index (SPY) cleared $209 resistance and could hit previous highs this week.

NASDAQ 100 Index (QQQ) cleared $106.75 resistance and moving higher.

Russell 2000 Index (IWM) at resistance and near the previous highs. Needs to clear the $125.61 mark this week. Monday broke higher closed on a doji candle? Watch upside continuation.

Volatility Index (VIX) closed at the bottom of the range 12.75-17.10. This validates the buyers are in control currently. Monday bounced with some modest selling? Watch.

Transportation (IYT) Dow theory has been in the headlines. Transports need to move higher if the broader index is to sustain a move higher. Reversal last week… finally and move above $157.50 is positive for the sector. Monday reversed, but still above the 200 DMA.

Dollar (UUP) the greenback remains a story line many are following. The strength returned last week and weakness in the euro and yen were in headlines again. This is good for the inflation worries, but does have an impact on the export numbers hurting the multinational companies bottom lines. Good long term, short term causes grief.

SECTORS OF INTEREST: 

China (FXI) still running higher on speculation. Upside remains in play for now and we manage the stop$50. The ETF is up 11.2% and it doesn’t hurt to lock in some gains as we saw some selling on Friday. Upside longer term still is positive, but going vertical is always a challenge.

Russia (RSX) has been in similar mode of late as oil prices have settled and even moved back to the top end of the range. Manage the opportunity in the country ETF relative to the volatility and news.

Emerging Markets (EEM) cleared resistance at the $41 level and made solid advance on the week. China, Brazil and other markets have benefited from the rotation into the global markets and away from the US markets the last two weeks. Adjust stops to break even and see how it unfolds.

Bonds¬†(TLT)¬†Rallied on the FOMC news… the endurance question¬†has been on the table the last two weeks. Weaker jobs impacted initially, but that didn’t last. Thursday it was the inflation factor or rumored factor that push yields higher and the bond lower. This changes the landscape with the $129.50 support. Opportunity is the breakout. Confirms TBT is the trade relative to the bond. $42.65 entry.

Crude Oil (OIL)¬†Simply put volatility within the trading range ($42.60-53.80). Speculation about demand rising… but,¬†the data showed supply is rising not demand. This pushed oil speculation to a dull moan and held the $10.70 support level. RSI moved above 50, but price is not above the 50 DMA. Watching.

Energy (XLE) Sideways consolidation got a bump of 3.1% last week to break higher. The move above the $78 mark offered some short term upside. Expect volatility in the sector. The other alternative to the large caps is to track IEZ, XOP, FCG.

Housing (ITB) $28.15 break from range confirmed and trade hit the entry point. Sector has positive momentum from the data… could be ready to move higher short term.¬†Tested support at $28 and held, but interest rates are bothering investors currently. Willing to give it some room to deal with current uncertainty on rates. Uptrend still in play.

Solar (TAN) second test of the move higher. $42.30 support, held $43.75 level and bounced back to new high. I like the upside continuation in the sector looking forward, manage the risk and let it run. Stop $46.50.

Biotech (IBB) tested 50 DMA bounced. Cleared $342.80 is level to watch on upside opportunity. Hit the breakout and buy opportunity. Cleared the $352 resistance and second entry opportunity. Let it unfold and give some room for volatility. Stop at $340.

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

Unfolding Stories in Sectors Currently:

Brazil – cleared a double bottom pattern last week and sits at $34 resistance. Looking for test and follow through on the reported improvements in the country. Let it unfold and validate the move higher.

Financials – This continues to be a laggard for the market, but if the US is going to move higher it needs some help from the sector. Looking for a leader to help. KBE, KRE, KIE, IAI are all looking similar at this point.

Healthcare – reestablishing the previous leadership. solid move last week off the recent low. XLV, IHI, XPH, IHF are all showing improvement the last two weeks.

Retail – the consumer is a key part of the economic picture and we continue to see a drift higher in the retail sector. The stall the last two weeks is a result of the economic data and rising worries. Watch the sales reports due out Tuesday. Break to new high is opportunity in XRT. PEJ is the leisure ETF which made a reversal last week off the current low? $38.25 resistance and move higher would help confidence in the consumer as well.

LONG TERM OPPORTUNITIES: 

Long term positions take time to manage and patience to let them unfold. The short term can be managed with hedging or trading off the longer term positions. The goal is to build the position and manage the risk. Sometimes the short term news and events cause anxiety… the goal is to mitigate the risk and protect the downside as we allow the stock time and room to grow. If you don’t like long term holdings don’t read the data below.
  • Facebook (FB) – $73.15 entry (10/16/14) added 1000 shares back relative to the long term outlook following the choppy drop in markets. Earning remain¬†good, but the outlook showed higher costs and has kept pressure on the shares to stay in the current trading range. >¬†Added to position: 500 @ $77.50 – 1/8< ¬†TODAY:¬†¬†Testing the move higher and bounced¬†at support $81.50.
  • Twitter (TWTR) – ¬†(1) Added 500 shares at $42.80 (10/28/14). (2)¬†Added 500 shares at $39.20¬†on¬†1/9/15. Use $45 at exit on shares added¬†(3)¬†Added 500 shares at $40.25 for trade Sold at $46.25 on 3/10/15. This is a long term holding, but we will trade on short term technical data if warranted. TODAY:¬†¬†Nice break finally above resistance and now looking for the follow through on the upside¬†as it is testing.¬†
  • Bank of America (BAC)¬†Sold all positions as this has become a train wreck of news and write downs. Earnings are here and it may set up trade opportunity with some cheap options?¬†¬†TODAY:¬†¬†$16 calls for April as play on earnings would be interesting at five cents. Tells you what investors think… they expect it to be bad. So far they have doubled to ten cents on the calls.??
  • Whole Foods Market (WFM)¬†(1) Sold our first position for a $6.50 profit on 1000 Shares held from 11/20/14 – 3/11/15. The outlook has improved after making changes to the stores and adding new stores. I like the long term outlook for the company. TODAY:¬†We hit our stops, but still looking for the next opportunity as bottom or support is established.$51.50 is holding and could be near term bottom and reversal point.