Notes for today, April 2nd

Jim’s Market Notes:

Start the month with economic data that is disappointing or continues to show the gradual decline over the last four months. ADP employment showed 189k private sector jobs and down from 214k in February. Construction spending was -0.1% versus 0.1% expected. ISM manufacturing was 51.5% versus 52.9% in February. The parade of data continues the balance of the week, but the continued decline is not a positive from my view and the broad indexes sold lower in response. The saving grace on the day was the major indexes did bounce off the early lows. Volume was average without any fanfare on either side. The sellers still failed to gain control of the direction even for the whole day. Patience is the key as we move forward and more data is released.

Airlines were downgraded with the sector declining 2.1%. The index is in a trading range and a break of the downside support would be negative for the transportation sector (IYT). Speaking of which is currently testing the 200 DMA again. Break lower is not a good sign for those who follow the Dow theory. Railroads are struggling as well at the bottom the their current range. IF we are not transporting goods it is a sign the economy is slowing again. Data is tipping the scales lower on the fundamental side of the equation.

China is reaching speculation/bubble status. I am not looking at the fundamentals as that is impossible to really do, but from the media attention. Volatility has risen in the ETFs and I would tighten my stops if you own it. We hit our stop last week on the one day of selling, but still watching the opportunity… it is just a little too far on the speculation meter without a test or pullback near term.

Today is last trading day of the week, but the jobs report will still be release on Friday. That should make for an interesting weekend if the data is weaker than expected. The futures are once again pointing to the downside and we will watch how the first hour of trading unfolds and take what the market gives good or bad. Stops are in place and ready for what comes our way.

SECTOR NOTES OF INTEREST:

The market had a feel of wanting to sell off on Wednesday and then the buyers stepped in on modest volume. The worries are starting to show up on the tape and not just in the headlines. That is a warning signs and it is important to protect the downside risk of the current environment. Since December the broad indexes have accomplished moving sideways with plenty of fanfare and headlines. If news like that from the Atlanta Fed revising GDP to 0% growth keep showing up in the headlines… investors will eventually move to the sidelines. Know where the exits are before the fire starts. Remember this is a stimulus obsessed market… anything that challenges that has an impact on the market. Example, China’s PMI data was better than expected worries in the headlines about the stimulus… not the growth in manufacturing. Never a good sign when that is how you analyze stocks.

S&P 500 Index (SPY) tested lower to the $204.50 level and held. Trendline off the October low is in play. $198.53 could be the next support level on downside. Take out support and watch to see if the seller take control. Bounce higher needs some conviction from the buyers. Patience.

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. Watching with interest as biotech and semiconductors struggle to find any traction.

Russell 2000 (IWM) fell back to test the $121.25 level and held. A break lower would bring the trendline in play off the October low short term and accelerate the selling. Moved back above the $123.75 mark and left a doji the last two days? trend change. Holding up well along with Midcaps (IJH).

Volatility Index (VIX) settling into a range of 12.75-17.10 for now. Neither side showed¬†much in terms of conviction. The¬†VIX remains as uncommitted as the indexes.¬†Anxiety relative to selling seems to have the edge… watch for the next opportunity. $15.80 on VXX is of interest. Intraday volatility is back.

Transportation (IYT)¬†Watching as indicator for the broader indexes.¬†Plenty of damage done last week¬†with the durable goods orders disappointing. Almost like the sector knew what the durable goods report would say. Held the 200 DMA support Friday.¬†Still not gaining any traction on the upside… shorts are circling.

Dollar (UUP) held the $25.25 level of support. Sold against the yen Wednesday? Watching to see how the buck trades today. The upside is still the bias and the challenges in Japan may be with only Japan for now. Watch today.

Bonds¬†(TLT)¬†Rallied on the FOMC news… now the endurance question is unfolding with the move to the 50 DMA.¬†Stalled near the high and the $132.25 resistance. Can it break higher on the worries in place? Trades only as the downside would be direction on choice with rate hikes on the horizon.¬†Flight to safety if the selling does take root near term.

Crude Oil (OIL) bounced and $9.80 entry point for the brave and anxious. Friday reversal on reality of supply offsetting jump on Middle East issues. Exit points already hit for small gain on crude, but it validates the lack of direction for the commodity and the news driven nature of prices. Bounced on Wednesday in sympathy with data less build up than expected. Still 4 million barrels added to storage. No logic only emotions trading crude.

Semiconductors (SOXX) selling bias still in play. The INTC rumored acquisition of Altera announced late Friday helped push the sector back above the 50 DMA on Monday, but that news has worn off an still looking for a catalyst. Plenty of work to do and the rotation from growth is still an issue. $92.58 support and $95.15 resistance. Decision time. Three stocks to watch in the sector INTC, NXPI, BRCM.

Financials (XLF) bottom of the range again with $23.75 support. Hold $24.15 level to clear resistance. KRE support $40 above $40.68 would be good for sector on upside, but still needs to hit new high to be of interest. Downside showing momentum, but¬†watch for support to hold. TD descending triangle pattern… break of the downtrend for reversal? Three others to watch are C, JPM, GS.

Biotech (IBB) tested 50 DMA. $356 resistance. Need the sector to show investor belief going forward for growth to stay in play. Sold back to previous low of $335 and held. Ugly currently and break lower only emboldens the sellers.

Solar (TAN) second test of the move higher. $42.30 support, held $43.75 level and bounced Friday. 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 on Monday and trade is there for the upside move and follow through. sector has positive momentum from the data… could be ready to move higher, but the broad markets will have some influence short term. DHI is of interest as it cleared the resistance at $27.80.

Europe (IEV) Tested the $44.11 support. The stimulus from the ECB is in play…¬†Only one worry for me currently, the trading is still coupled to the US markets. It will outperform, but is susceptible to any sneeze or cough in the US. 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. Move above the $78 mark could offer some short term upside if the volume picks up. Watch crude… it wants to move higher and that could take the stocks with it near term. Trade only at this point.

“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 off support Wednesday. Patience.
  • 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:¬† Holding steady and still looking for follow through on upside move. 51.55 level to clear.
  • Bank of America (BAC)¬†Sold all positions a this has become a train wreck of news and write downs. If the banks rally could find a upside trade in the stock, thus watching for a few more days as this unfolds.¬†¬†TODAY:¬†¬†A break of the support at $15.15 opens way for downside trades in the stock.
  • 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:¬†Broke 50 DMA and now support at the $52 mark. Selling is in place, but I still like the upside. 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.