Outlook for Week of April 6th

Jim’s Market Notes:

Jobs report was released on Friday with the markets closed and it was not pretty. The weekend may give everyone time to deal with the emotions of it, but it still wasn’t good. The number was half of what was expected and it just fanned the flames about the Fed and what they will do with interest rates. We can dissect the number every way you want, but the bottom line for me is they are confirming the weakness we have already seen in the last four months economic data. Two challenge we have to watch going forward, first, speculation from the markets about what all of this will mean and a rise in volatility for stocks. Second, impact on the consumer and investor sentiment. If the media puts more fear into play, we may see saving rise and spending stall further. And, the housing markets may slow as well. Snowball effect of this where my concern lies.

The choppy markets we have been experiencing the last four months are likely to get even choppier… if that’s possible. Now is the time to put your defensive hat on and make the necessary adjustments to your portfolio relative to stops and how you view future investments.

The geopolitics around the world are still of interest. Iran and the deal with nuclear power is impacting oil prices. I will not even mention the lack of understanding about this deal to anyone with common sense. Greece and the EU are setting to part company and that invites Russia into yet another political hot potato. Stimulus in Europe continue, but will the weaker dollar in the US (economic data and Fed indecision) derail the efforts? Japan’s dangerous game of stimulus. China doesn’t want to be left out of the free money economy. Oh this is all getting very interesting as the dominoes are all being lined up for someone, something, somehow to tip the first one and then we get to watch the fun of watching them all fall.

This promises to be fun filled week of news, speculation, volatility and opportunity. We have to patient, disciplined, focused and aware. Let Monday unfold and the anxiety of the pent up emotions from a long weekend get out of the way. Then look at the reality of where we stand and move forward. Futures over the weekend moved lower, but that can change by the opening bell on Monday… let it play out then evaluate.

SECTOR NOTES OF INTEREST:

Very low volume buying on Thursday. Poor jobs report on Friday and now we see how and what presents the best opportunity.

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. If we break support we will see if the seller take control. SDS $21.65 entry if the downside trade develops. Upside will take some convincing for me.

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. QID $37.40 entry if the support levels give way.

Russell 2000 (IWM) fell back to test the $121.25 level and held. Moved back above the $123.75 mark and starting the week 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.

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. $26.15 on VXX is of interest.

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. Vultures are circling?

Dollar (UUP) held the $25.25 level of support.¬†Moved to $1.10 against the euro on Thursday. Fed indecision, weaker jobs, weaker economic picture… weaker dollar. Long euro trade may set up this week. (ULE or FXE)

Bonds¬†(TLT)¬†Rallied on the FOMC news… the endurance question¬†has been on the table the last two weeks. But, if the economic data instill more fear into the markets money will rotate to the bond short term. Yields dropped on Friday against the jobs report. Watch for move in bonds. $132.40 is resistance on TLT.

Crude Oil (OIL) Simply put volatility within the trading range ($42.60-53.80). Catalyst is needed to change that. Too much speculation for my taste currently and willing to let it unfold. The bad news circling would be a downside pressure on crude.

Semiconductors (SOXX) selling bias still in play. 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. 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. 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 Thursday. 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 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.

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. Some stocks to watch are NTES, DANG, BIDU.

“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¬†back 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.