Notes for Today, March 27th

Jim’s Market Notes:

The selling continued at the open on Thursday, but the buyers were willing several times throughout the day to step in and push the indexes back towards Wednesday’s close. Thus, we ended with an intraday reversal… on the weaker side, but one to watch as we open trading today. What are we looking for? Simply put… to hold the trendline off the October lows. If that fails to hold and we head into next week with the downside momentum… it could get ugly next week. The downside to this point has been manageable… more and it could be the tipping point to retest the October lows.

Breaking down the sectors on close Thursday gives some insight relative to leadership or lack thereof. The trailing five days shows Energy as the leader. Really? Yes because it has traded sideways while the others have given ground. The other nine sectors for the same period show distribution or selling. For the trailing ten days not much difference overall. Energy is still the leader and the balance are struggling to breakeven or hold losses to a minimum. Basic materials is the biggest loser down 3.3%. Thus, it is decision time for the market and we will see how this unfold going forward.

The economic data continues to be a challenge for investors as it has done nothing to build confidence looking forward. Even the Fed has become concerned as we head into the 3 consecutive months of data moving lower or breaking even at best. The first quarter has not been impressive and with the end less than a week away it may add to the worries for investors. Earnings start in the next three weeks and the outlook is flat for the best case of the S&P 500 index. Not enough revisions to prepare investors from my view. Jobless claims on Thursday were better than expected and today we fact the GDP for Q4 and consumer sentiment. Nothing big, but enough to keep us on our toes.

Let the move play out today and see how the intraday reversal unfolds. Upside bias, but that has not mattered of late.

SECTOR NOTES OF INTEREST:

Futures are flat as I post these notes… Worries are creeping back into the market, leaders are giving up key levels and the banter is staring to dominate the headlines. All the current noise is fine, but the real challenge from my perspective is the warnings hitting already about earnings. Weak economic numbers, uncertain Fed, geopolitical issues, wars globally, etc. and the nerves start to rise. Stops in place (we have hit plenty on micro term trades) and we watch to see how today unfolds. If we take out the short term trendlines off the October lows watch for more selling if we fail to reverse prior to the close today.

S&P 500 Index (SPY) tested lower to the $204 level and reversed intraday to close below the $206 support level. Trendline off the October low is now in play and a confirmation below the support would be a negative heading into next week. $198.53 is the next support level after that.

NASDAQ (QQQ) fell below the 50 DMA and negated the break above the $106 level. Small bounce on Thursday, but still not convinced by the move. Looking for some confirmation on the move. SOX index led the downside again with a 1.3% decline. This is one of the key leading sector breaking lower. Biotech was the other component with heavy casualties on Wednesday losing 4.1%, but managed to close flat on Thursday. If the two leaders decide to sell lower this could get ugly quick.

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. What looked promising has turned sour for now. Watching how this unfold relative to the trendline today.

Volatility Index (VIX) started on the upside at the 17 mark and resistance. The move back to 15.8 on the VIX offered some hope for  investors to complete their objective. If the index jumps higher near term the fear factor may well be back in play.  VXX is the upside trade if volatility holds the move higher short term.

Transportation (IYT) Watching as indicator for the broader indexes. Plenty of damage done on Wednesday with the durable goods orders disappointing. Almost like the sector knew what the report would say. 200 DMA is the key support and held for now. We will watch how this unfolds going forward as a indicator for the broader market and economy.

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, and small bounce on Thursday. Traders are rotating with the speculation… manage the risk if you trade effects. We already hearing the preliminary blame it on the dollar for an earnings miss, but watch the upside of the dollar to continue.

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. Hit the exit on Thursday as the yields moved back to the upside on worries.

Gold (GLD) cleared the $113 resistance. Sustainability of move higher? Dollar dependent for now, but the renewed inflation talk after the CPI report is helping the upside as well near term. Watch how the dollar responds and take your cues. Gold miners are not responding in kind the last three days. Let the investors decide short term. (ONLY ETF Watch List). Silver (SLV) and silver miners (SIL) are worth watching on the move as well.

Crude Oil (OIL) bounced again today and $9.80 entry point for the brave and anxious. Looking for some substance versus speculation… Thursday the Middle East issue added to the upside. I still think it is trading positions only for now.

Semiconductors¬†(SOXX) sell growth if inflation is heating up and earnings are going see an impact from the dollar… and that is what investors did. This is the second false breakout and it may hold the downside move based on the inflation fears and dumping growth stocks. Hit stops on micro term trades today.

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 and that confirmed the downside¬†move for Wednesday.¬†Small bonce on Thursday, but plenty of work left for the sector to recover.

Energy (XLE) the sector has stalled again despite the move higher in oil prices. need to see more upside if we want to put money to work in the sector.

Europe (IEV) nice follow through move last week on the upside. 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?¬†Holding the line for now, but more hope in the country than the US currently.

“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 closed up slightly.¬†¬†Continues to show strength for now…. patience with selling in markets near term.
  • 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).¬†Holding steady and still looking for follow through on upside move.¬†
  • 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:¬†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.