Notes for Today, March 25th

Jim’s Market Notes:

Interesting day as the markets attempted to follow through on the bounce from last week, but by the end of the day it has erased the modest gains and closed in the red. Technology struggled on the day. Biotech fell 2.1% after big move last week. The dollar continued to move lower and telecom was the only bright spot in the S&P 500 index. Day of rest and testing is as simple as I can explain it.

Transports continue to lag with IYT moving towards support again at the $158 level. Remains in trading range and not confirming any move to the upside. This also confirms some of the current testing in the broader indexes. NASDAQ is leading the test as it fills the gap left last Friday on the move higher. The large caps are the laggard currently as investors attempt to determine the outlook for the dollar and the strength of the US economic picture.

The¬†economic data sees good news in the housing sector as sales grow 7.8% in February¬†and 25% year-over-year. Inventories are running low at the lower end of the housing market. Thus… the bad news is rents are creeping higher. That pushed the CPI up 0.2% on the core ahead of estimates. There seems to be plenty of mid to upper end priced inventory, but the starter size homes are tough to find keeping rents up.¬†This trend is worrisome to the Fed relative to inflation. Overall the economic picture remains murky and it will have to turn to¬†the upside if we are to regain any strength going forward.

Let the test play out with the upside still the trend.

SECTOR NOTES OF INTEREST:

Semiconductors (SOXX) made break above the $97.70 level of resistance and looking for the next level to hit new high above the $99.50 level. Tested lower this week, but still in position to move higher. {31 stocks in sector with SWKS and CAVM leading over the last week.}

NASDAQ (QQQ) In position to break higher, but tested as well this week. Looks just like the SOXX chart? Coincidence?

Russell 2000 (IWM) cleared¬†the $123.75 high.¬†Taking on leadership again. Short term uptrend still in play… current story is rotation on stronger dollar… that could unravel if the dollar weakness sustains. Still near highs.

Volatility Index (VIX) testing lows as the uncertainty disappears. Fed is catalyst on the move watching how that  unfolds as it could test the July lows near the 10.4 mark.

Transportation (IYT) Watch as indicator for the broader indexes. Trading range still in play with significant drop on Monday and Tuesday 2.5%? Test in the index.

Dollar (UUP) broke¬†support at the $25.75¬†and now $25.25 next¬†with the 50 DMA. Helping gold, oil and emerging markets with the downside move. The rally has stalled, but will return as the Fed confirms their thinking process on interest rates near term. Traders are rotating with the speculation… manage the risk if you trade effects.

Bonds¬†(TLT)¬†Rallied on the FOMC news… question is how much and how long does it last?¬†Stalling near the high and the $132.25 resistance. Watching the 50 DMA as¬†my exit point on any trades in the bond.

Gold (GLD) cleared the $113 resistance. Sustainability of move higher? Dollar dependent for now. Watch how the dollar responds and take your cues. Gold miners are worth trading on the move with NUGT if so inclined to accept the risk. (ONLY ETF Watch List). Nice follow through on for the week.

Software¬†(IGV) ‘V’ bottom and ready to break higher, but resistance is presenting a test for now. The doji candle left resulted in a move lower last two days. Confirm the downside or resume the upside? Patience.

Networking (IGN) bottom reversal needs to clear resistance on stronger volume. I like the parts better than the whole and would scan looking for leadership.

Europe (IEV) nice follow through move on Friday. The stimulus from the ECB is in play… All of the global markets got a boost from the weaker dollar¬†of late. That leaves the question about the dollar on the table… higher or lower? That makes any trades relative to this higher risk as it is based on the speculation of the outcome going forward.

Scanning the country ETFs shows EWP, EPOL, EWA, EWQ & EWW are breaking from bottoming range, EWZS, EWZ starting stages of a bottom reversal, RSX attempting to gain some upside momentum short term, EWL break to new 52 week high.

Energy (XLE) the sector has stalled again despite the move higher in oil prices.

“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:¬†¬†Gapped higher and hit new high last week.¬†¬†Continues to show strength for now…. patience.
  • Twitter (TWTR) – ¬†(1) Added 500 shares at $42.80 (10/28/14). (2)¬†Added 500 shares at $39.20¬†on¬†1/9/15. ¬†(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:¬† Use $45 at exit on shares added (#2 above). ¬†Your patience is rewarded with the jump higher and break from the range. This now has to confirm the move and looking at $54 as the next target.¬†
  • Bank of America (BAC)¬†(1) Added Jan 2016 $17 Calls at $1.15 (avg price)/300 contracts. (2) Added 2500 shares at the $16.35 mark ¬†on 10/21/14. Banks are¬†gaining some ground on the proposed hike in interest rates and I still like our position going forward as we practice patience. TODAY:¬†¬†Not shaping up looking forward and we will look at exiting the position to find a better long term opportunity. HIT STOP and sold positions to move on to other opportunities going forward. T00 many anchors to drag along currently.
  • 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 still like the long term outlook for the company. TODAY:¬†Moved below¬†the 50 DMA and we watch to see how it unfolds near term.¬†Lost momentum and looking for support. Some test are longer than others, but the upside is still fundamentally what we are looking for.