Notes for Today, April 7th

Jim’s Market Notes:

Negative jobs report… no problem! After all stimulus is better than a healthy economy. The government will keep things going so let’s buy stocks. This is what the equity markets have become over the last five years plus. If stimulus is the choice the market likes it. We have now become an entitlement market along with the¬†economy. Not a good place to be for a capital based environment. Somehow this doesn’t end well.

Midcaps were the leader on the day and tech put in a solid showing on the day as well. The biggest winner was energy as oil prices jumped 6% on mixed speculation about US demand, Asia demand and gasoline demand rising. No facts, just speculation. That was a enough to push oil and the energy stocks higher on the day.

The geopolitics around the world¬†took a backseat for the day, but don’t ignore the fact they are still in play. The bottom line for stocks is stimulus trumps all.

The Fed by the way… did blame the weather! They dismissed this quarter as a sign of things to come and stated things would essentially return to normal going forward… of course they will… whatever normal is.

I stated this would be a fun filled week and it starts off with a bang. It is far from over and we will need to remain patient as this all unfolds one day at a time.

SECTOR NOTES OF INTEREST:

Not much better on the volume front on Monday? If the buyers are ready where are they? Better yet where are the sellers? Fed subliminal message to the markets? Still willing to be patient currently despite the hype about things looking better if the Fed delays the hike in rates. Speculation and rumors create hope trades and they are not my idea of a strategy. Be patient.

S&P 500 Index (SPY) tested lower to the $204.50 level and held again. Trendline off the October low is in play. $198.53 could be the next support level on downside. Tested lower at open and bounced on Monday to hold the trading range again.

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. Negative open and bounce back on Monday? Watching for follow through.

Russell 2000 (IWM) fell back to test 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. Midcaps (IJH) are in the same boat trend wise and leading. Watch how it all unfolds relative to bounce on Monday.

Volatility Index (VIX) settling into a range of 12.75-17.10. Neither side showed¬†much in terms of conviction last week, but the jobs report could tip the scales. Anxiety relative to selling seems to have the edge… watch for the next opportunity.¬†Buyers took more volatility out on Monday.

Transportation (IYT)¬†Watching as indicator for the broader indexes.¬†Plenty of damage done last week¬†with the durable goods orders disappointing. Moved back to the bottom end of the range with support at the $154 mark. Closed below¬†the 200 DMA Thursday and $154 on Monday… 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)

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 needed to change that.¬†The catalyst on Monday was speculation at its best. The news that Saudi Arabia raised its prices to Asia 30 cents rose speculation that demand was higher in Asia. Thus, 6% bump in crude… perfectly logical! Trade it you like the move back above the 50 DMA was a plus now a follow through is key.

Semiconductors (SOXX) selling bias still in play. Plenty of work to do and the rotation from growth is still an issue. $92.58 support (held Monday) and $95.15 resistance. Decision time. Three stocks to watch in the sector INTC, NXPI, BRCM. SOXS short side entry if we break support.

Financials (XLF) bottom of the range again with $23.75 support. downside is building and will to be short this sector based on the lack of participation in the rally. The buzz about the Fed not hiking rates is taking a toll on the sector outlook and thus it is stalled. FAZ is the short ETF. If upside materializes we will go with the flow… but, for now the sellers still look more in control.

Biotech (IBB) tested 50 DMA. Needs catalyst, but the negative sentiment towards growth stock is gaining traction. 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…¬†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 got a bump of 2% on Monday. The move above the $78 mark offered some short term upside. Still need follow through on prices and crude. 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 not showing signs of strength at this point. However, there are some parts doing well and worth attention. FB, TWTR, WWWW, LLNW and if they hold they will set up trade opportunities.

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

“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 of $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:¬† 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.