Notes for Today, March 18th

Jim’s Market Notes:

The broad indexes sold lower to start Tuesday’s trading, but stalled and drifted sideways to higher in anticipation of the FOMC meeting. NASDAQ and Russell 2000 ended higher, but the S&P 500 and Dow ended lower. Mixed views as the early anxiety in the VIX disappeared by the close. Just another boring day for traders. Apple kept it interesting gaining 1.7% on the day and impacting the indexes due to the capitalization impact on the index. Still when it was said and done not much changed on the day.

The leading sector was technology thanks to Apple. The rest ended the day in the red as the market drifts towards today’s FOMC meeting results.

The economic data disappointed with the housing numbers not meeting estimates and another number shows weakness. Could GDP for Q1 come in below 1%? Homebuilders (ITB) dropped as a result, but still holding the 50 DMA support and uptrend is still intact.

The FOMC will create emotions today and the reaction initially may be down on the commitment to hike rates… but, don’t get fooled. The buyers are near by and may well step back into any selling. Let it play out you don’t have to be the first one in the pool to make money.

This week I am watching where the money flows… buyers have been willing to step in, but the FOMC statement will have some say today. The key to any bounce is a follow through if we are going to maintain the longer term uptrend versus the current chopping around with indecision.

SECTOR NOTES OF INTEREST:

S&P 500 index (SPY) Tested the¬†$207 support again and held… but, not showing much strength based on the indicators.¬†$209 is the next level to clear if this bounce is going to amount to anymore than a bounce.

NASDAQ (QQQ) Apple kept the index in positive territory and at the $107 resistance. Need to clear this level it the index has a shot at moving back to the previous highs at $109.35. Bounce is still in play.

Russell 2000 (IWM) Needs to clear the $123.75 high. Closed at new high as the index is attempting to take on some leadership near term.

Volatility Index (VIX) jumped to 16.3 early, but the anxiety calmed and closed flat at the 15.6 mark. Still watching the response to the Fed on how this unfolds on the week. Move above 16.8 on the close gets interesting.

Financials (XLF) moved back above the $24.60 resistance and made progress on the upside breakout Monday. Stalled on Tuesday and we watch to see if the Fed will help by giving some clarity relative to interest rates. The longer term view fundamentally still offers promise, but the short term volatility is keeping investors at bay. KBE is position to break to new high and run and money flow to banks has been positive. KRE is the same with the exception that regional banks have more favor than dislike from the populous. IAI shows the brokers breaking to new high as well and KIE is playing catch up. Overall favorable short term, but with a cautious eye on the government.

Semiconductors (SOXX) held the $96.50 mark after big bounce on Monday. Jury still out on the leadership of the sector, but watching to see how it unfolds near term.

Transportation (IYT) Trading sideways as seen with the 50 DMA. Content to swing in the current range. Then why put it here in the sectors to watch? If the downside comes into play historically that is a negative sign for the broad market overall. $156 or the 200 DMA would be the key support level for the sector to hold. Equally if the Dow makes a new high the transports need to follow on the upside.

Dollar (UUP) big move on upside and testing after the vertical move higher. Strength getting bad reviews from the multi-national stocks. Hurting oil and gold prices as well… as expected. Believe it or not a strong dollar is good for the US… Money is rotating to the small cap stocks as a result of the dollar. Watch the correlation if the dollar stalls or retreats.

Bonds¬†(TLT)¬†bounced on fear, followed through on belief the Fed won’t hike rates soon. FOMC meeting today will settle the issue short term… TBT vs TLT is how to watch the outcome.

Gold (GLD) testing the $110 low wants to bounce? Gave up the early gains on Tuesday and bad sign for the upside bounce opportunity in the metal or the miners.

Watching: The bottoms for: XLU, IYR, both established near term lows as hoped to start the week. Watching for the follow through off the low. GLD is still bottoming. ¬†The reversals in: XLB, XLE, XLK progressed on Monday… watch for trade.

“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:¬† The volatility has picked up on the move higher and we will watch how it unfolds.¬†Uptrend has turned into a broad chop, and¬†broad markets selling isn’t helping. 50 DMA back in play.
  • 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) and we will hold the balance for now. Small bounce on the day and watching for now.¬†
  • 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. Said that and we bounced on Wednesday to keep us in the game for now.
  • 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:¬†Looking to test the 50 DMA and we watch to see how it unfolds near term. Modest bounce off support. Close below look at selling the puts to get the stock back at favorable price.