Market Notes for Today, June 11th

If you are like me simple is always better when it comes to tracking and looking at the markets. I have shared my written notes, (thank you for the comments and suggestions) as they help me organize my thoughts each morning before the markets open. I used to call it may daily trading plan, but now I just call it trading notes. If the market unfolds in conjunction with my beliefs I take action on what I have in my notes…. and nothing more. Why? Simply for the reason I have not done my research well enough, nor was it within my belief strategy/notes for the day. This keeps me focused and not chasing rabbits down a hole like Alice in Wonderland. They are simple notes as you have seen and they have action items attached should the idea, story or belief unfold for me to add/subtract positions to my portfolio. I am glad that many of you have found them helpful. Tonight I wanted to share the initial step in putting together or finalizing my trading notes each morning.

This is turly step one in the process… each night I gather my thoughts from the trading day. Many of the notes I write here each night are taken from this step, but tonight I am going to show you how the list starts from the action and news from the trading day. As you can see above this process is called “Market Notes”. Why? Because I make notes throughout the trading day on activity in the charts, news in the headlines, events taking place, or simply ideas I come up with in light of what is happening during the day relative to all three. For me this is living within the market versus trying to analyze the market just from a chart, fundamental data or events. This first step is the ability to step back and absorb some of the common sense activity within the market today and how it could benefit my investment selections going forward.

Below is the list for today… read it, use it if it helps, develop your own ideas from the notes or delete it… whatever helps you be better at this process of money management is the goal… sharing what I do is the best teaching process I know for helping others. I am not perfect, nor do I have a perfect way of managing money… but, I do have a strategy and system for managing the six inches between my ears… which is where most investors get in trouble. Quiet the squirrels running around in our brains and we will be better at this process called money management.

  1. The broad market indexes hold onto and digest the move higher from Wednesday. This is an important first step if we are to resume the uptrend off the October lows. We have spent the last two weeks drifting lower in sea of news, speculation and events. As I am fond of saying, “take it one day at a time and let the story unfold.”
  2. Crude oil moves down 1.1% after two strong days of buying. The trading range remains in effect as the commodity fails to break through the ceiling today. Doesn’t mean it won’t just delays it for now. Weaker supply data on Wednesday was part of the catalyst on the upside… as we head to next week supply data and speculation about the supply of crude will be the driver. Each Wednesday we get an update on supply and if the trend builds on progressively lower supply the upside will prevail with a fundamental reason for doing so… that makes the cast for owning crude a positive and sustainable. Thus, I am watching how this unfolds going forward.
  3. The dollar (UUP) bounced slightly after three days of selling. That held oil down on the day as well as impacting some other areas like emerging markets and gold. This is far from over and I believe the dollar will settle into a trading range near term. Some are calling for a weaker dollar, but unless the geopolitics and global economies suddenly spike higher the buck offers a sound alternative to the world overall.
  4. The energy sector (XLE) is not responding to the positive move in crude. This shows that investors are not inclined to believe the supply side is going to drop much further. If it does in fact validate the price for crude to move higher (#2 above) this sector will be one to own in conjunction with oil as it is oversold technically and offers plenty of upside if the underlying commodity improves with conviction.
  5. Healthcare (XLV) remains a leader with the move today back above the previous highs the uptrend remains intact and so does our ability to make money to afford to pay for our ever escalating premiums for health insurance. The providers (IHF) also hit a new high and continued the uptrend. Biotech (IBB) likewise moved above resistance and pharma (XPH) is stalled, but looks ready to move through the current resistance at the $126 level.
  6. On the data side of life, retail sales for May were announced this morning and they fell short of expectations rising only 1.2% for the month. Ex-autos they were basically in line with expectations and amounted to no harm done in retail sector (XRT). the attempted rally above the $100.25 level failed to hold on the day. Holding in the trading range established and we continue to watch for a solution on the upside for the sector. It is worth the time and energy to scan the sector and look for the defined leadership. When sectors like this find a trading range there will be leadership on the upside or the downside that will resolve the trading range and which direction it will move. There are 100 stocks in XRT. Using a custom date sort for the length of the trading range, April 30th – June 11th you can scan for how many leaders on the upside there are versus leadership on the downside. Compare it to the S&P 500 index returns for the same period (up 1.2%) to separate the two camps. 56 were below this baseline and 44 were above… thus the bias is on the downside as of today. Scanning the leaders for the period shows some positive upside bias pattern trades to track. The downside shows at least 10 bottom reversal setups worth looking at for trades. It is important to not assume anything about the markets, but to find stories, events and ideas that lead you to trades you can believe in and act on with a defined strategy and discipline. Not to mention it makes investing more of lifestyle event than a overly analytical one that has you going crazy.
  7. Volatility index moved back below 13 and in position to test the lows yet again. Despite all the news and nervousness about a correction… it is still not showing up in the volatility index. This puts the bias still with the buyers from my view. Until the horse dies… keep riding.
  8. The banks continue to define the near term leadership. The belief is the Fed will hike rates in October. The market is pricing that belief into the bonds. Banks are a benefactor longer term of the higher rates. The economy may struggle near term, but it is something to watch, trade and manage as it unfolds.
  9. Ten-year treasury bond fell nearly 10 basis points in yield today… 2.38% and that rallied the bond (IEF) 0.7%. Another attempt at a bottom reversal in the bond? Worth watching. I stated two days ago that the technical data was pointing to oversold in the bond. Tracking that to today gives us a possible upside trade in the bond if the reversal pans out tomorrow. This is why we take notes every day.

I will keep the list short tonight as you get the idea of how to build your notes, track them, and implement action in relationship to them in accordance with your strategies and discipline. Overall today was a positive and we head to the last trading day of the week with an upside bias in the broad market indexes.