Notes for April 8th

Jim’s Market Notes:

The Fed continues to create a story line that is opposite of where we started the year… patience about hiking rates. The word on Tuesday was to wait until 2016. This is adjusting the bond market and how investors view the outlook for rates. TLT continues to hold near the 50 DMA and gained 0.9% on Tuesday.

M&A is back in the headlines as Fedex is in Europe buying TNT Express. Is this a sign of improvement in Europe? Not sure I would go that far, but it is a positive, but still plenty of work to do. IEV needs to clear the $45.75 resistance for starters.

S&P 500 index spent the last hour of trading giving up the gains on the day and still not able to get through the 2092 resistance.

I stated this would be a fun filled week and it not disappointed to this point. Alcoa kicks off earnings season tonight and it will set the tone as financials prepare to let us all in on their progress. Patience remains the theme as the marks chop around in the current range.

SECTOR NOTES OF INTEREST:

S&P 500 Index (SPY) Hold above the $204.50 level and consolidating again. Trendline off the October low is in play. $198.53 could be the next support level on downside.

NASDAQ (QQQ) $104.83 support and watching how this unfolds as well. 200 DMA would be the key level of support with plenty and levels in between that could hold. Move above $106.75 would be of interest.

Russell 2000 (IWM) tested the $121.25 level and held. Moved back above the $123.75 mark and I would use that as my stop if the downside steps up. Uptrend off the October lows still in play. Midcaps (IJH) are in the same boat trend wise and leading.

Volatility Index (VIX) settling into a range of 12.75-17.10. Neither side shows much in terms of conviction and not even a negative jobs report tipped the scales. Investors are becoming lethargic again.

Transportation (IYT)¬†Watching as indicator for the broader indexes. Moved back to the bottom end of the range with support at the $154 mark broken on Monday, but recovered some on Tuesday. Closed below¬†the 200 DMA… Good news from Fedex helped, but not enough to remove the worry in the sector. Watch the impact to the broader index if any near term.

Dollar (UUP) held the $25.25 level of support. gapped lower, but managed to bounce back on the day.¬†Fed indecision, weaker jobs, weaker economic picture… weaker dollar. Long euro trade may set up this week. (ULE or FXE @ $108 break is interesting) Bounce in the buck on Tuesday kept the lid on Europe. Greece and the EU issues are not helping Europe currently.

Bonds¬†(TLT)¬†Rallied on the FOMC news… the endurance question¬†has been on the table the last two weeks. Weaker jobs impacted rates over the weekend, but that didn’t last Monday. Yields rose despite¬†the jobs report. Watch for move in bonds. $132.40 is resistance on TLT and $129.50 support.

Crude Oil (OIL)¬†Simply put volatility within the trading range ($42.60-53.80). Catalyst is in play… speculation about demand rising. The news that Saudi Arabia raised its prices to Asia 30 cents rose speculation that demand was higher in Asia. Thus, 10% bump in crude last two days… perfectly logical!¬†If we hold break above the top end of the range trade? Risk is there, but you can manage it with your stops. See last nights notes posted on oil.

Semiconductors (SOXX) selling bias still in play. Plenty of work to do and the rotation from growth is still an issue. $92.58 support and $95.15 resistance. Decision time. The doji close on Tuesday pushes the point of decision.

Financials (XLF) bottom of the range again with $23.75 support. Remains stuck for now, but earnings starting soon… will be answer for many.¬†The buzz about the Fed not hiking rates is taking a toll on the sector outlook and thus it is stalled.

Biotech (IBB) tested 50 DMA. Needs catalyst and if the upside gains traction in broader indexes could offer momentum back to the sector. $342.80 is level to watch on upside opportunity. Set your stops and see how this unfolds.

Solar (TAN) second test of the move higher. $42.30 support, held $43.75 level and bounced back to new high on Monday. I like the upside continuation in the sector looking forward. Broad market direction could have influence short term.

Housing (ITB) $28.15 break from range confirmed on Thursday and trade hit the entry point. Sector has positive momentum from the data… could be ready to move higher, but the broad markets will have some influence short term. DHI cleared the resistance at $27.80. Scanning for more ideas in the sector.

Europe (IEV) Tested the $44.11 support. The stimulus from the ECB is in play… It will outperform going forward is the assumption, but it is susceptible to any sneeze or cough in the US markets and Greece remains an issue. Beware of this moving forward. This is a long term position opportunity my view anyway and plenty of volatility to go with it. Not for the faint of heart.

Energy (XLE) Sideways consolidation got a bump of 2% on Monday to break higher. The move above the $78 mark offered some short term upside. Still need follow through on prices and crude to hold promise will help. It wants to move higher and that could take the stocks with it near term. Trade only at this point.

Internet (FDN) testing the bottom of the range and bounced? I like the stocks to some degree better than the whole, but watching both. TWTR breakout was positive as we added a position. Nice move in JNPR as well.

China (FXI) still running higher on the stimulus speculation. Watching for test and opportunity. Upside remains in play for now and we manage the stop$45.50.

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

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.¬†
  • 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.
  • 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. The earning validated what I have been following for the last year and the company should be at the front side of a long term upside based on fundamental growth. 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.