Jim’s Market Notes:
Coming off the week of selling investors are at a crossroads relative to belief and actions towards their portfolios. The micro trend is broken lower. The short term trend is in play off the October lows. The 50 DMA is still in play on many of the indexes. The challenge… clarity. Too many issues facing investors and none are going to be resolved short term. If anything the data dump this week may cause more uncertainty relative to the Fed, interest rates, and the economy. March comes to an end and that brings all the data for the month to review. We will be interested to see if any improvements were made during the month… not likely.
This will be a tune up week for earnings as the pre-announcements have started and they are not good. GDP estimates are being lowered for the first quarter to 1.5-2% range, and that is ugly. The fundamentals continue to erode and I have said plenty they don’t matter until they matter… that may be coming soon. I continue to watch how investors respond to the reports.
Yellen and the 12 dwarfs (fed presidents) are still not sure of what they want to do and thus the renewed volatility in the bonds, stocks, and commodities. This is not likely to change this week either, but I am sure they will offer comments that contradict all week.
Growth stocks remain the key story for rotation I am watching this week. Biotech and Semiconductors have struggled to deal with the outlook for the economy. Weaker fundamentals on the stronger dollar hasn’t helped. The CPI numbers was the key catalyst to the rotation to value. The real rotation has been to the global markets with Europe the number one gatherer of assets. 3 to 1 rotation from US equities to European equities the last month as reported by the Morningstar numbers for mutual funds. This is a story line we will continue to watch.
There is plenty of information, data, news, speculation and prognostication to deal with currently. Choppy markets are created in this environment and it is best to look for leaders like solar and possibly home builders currently. Avoid the declining sectors and look for the trend to develop. In other words, keep money on the sidelines relative to the micro and short term views. The longer term views need to be adjusted relative to exit points and management of the positions. Take it one day at a time and keep your emotions intact by be disciplined in your process of managing money.
Monday @ 5:30 pm we have a webinar on how to use better processes for managing money using the Pattern Trading Strategy… See you then.
SECTOR NOTES OF INTEREST:
Is the market ready to bounce or continue to test lower? Yellen and the 12 dwarfs continue to banter about interest rates and the economy. Earnings are coming. End of month economic data next week. And, and, and, the list keeps going. Nerves are on edge and investors are moving money. Watch the flow for clues on what is taking place short term. This remains a choppy market environment.
S&P 500 Index (SPY) tested lower to the $204 level and held. Trendline off the October low is in play. $198.53 is the next support level after that. (DIA is in the same situation with $176.50 support and $171 next key level to watch.)
NASDAQ (QQQ) at the 50 DMA and October short term trendline. Held $104, but needs some help from the semiconductors and biotech. 200 DMA would be the key level of support with plenty and levels in between that could hold. Move back above $107 of interest on upside.
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. Still looking the best of the indexes currently.
Volatility Index (VIX) settling into a range of 12.75-17.10 for now. Closed at the 200 DMA and not much driving other than worries about everything. If the clarity issue (lack of) continues look for the index to break above the top end of the range.
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 durable goods report would say. Held the 200 DMA support Friday. Inside day and could offer some on Monday.
Dollar (UUP) holding the $25.25 level of support. The test of the dollar has helped gold, oil and emerging markets reverse their downside move. The upside is still my bias for the dollar. move back above $25.75 is key move. Short euro if we reverse off support (EUO).
Bonds (TLT) Rallied on the FOMC news… question is how much and how long does it last? Stalled near the high and the $132.25 resistance. Tested the 50 DMA and hit exit from my view. Did bounce on Friday, but watch the fear factor as an indicator for flight to safety.
Gold (GLD) attempted to clear the $115.25 resistance Friday. Reversal clearly in play, but for now long? CPI data and inflation talk is helping and will be more sustainable than speculation. 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 and $9.80 entry point for the brave and anxious. Friday reversal on reality of supply offsetting jump on Middle East issues. I still think it is trading positions only for now with tight entry and exit parameters. No clarity for a trend to develop.
Semiconductors (SOXX) selling bias still in play. The INTC acquisition of Altera announced late Friday helped push the sector back near the 50 DMA at the close. Plenty of work to do and the rotation from growth is still an issue. $92.58 support
Financials (XLF) bottom of the range again with $23.75 support. break short trades accelerate. Hold $24.15 level to clear. KRE support $40 above $40.68 would be good for sector on upside, but still needs to hit new high to be of interest.
Biotech (IBB) tested 50 DMA. $356 resistance. need the sector to show investor belief going forward for growth to stay in play.
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.
Housing (ITB) $28.15 break break from range would be of interest. The sector has positive momentum from the data… could be ready to move higher.
Europe (IEV) Tested the upside move and never really 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. If 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.
“Vision without action is a daydream… Action without vision is a nightmare.” Japanese Proverb.
Long Term Opportunities:
- 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: Moved higher and closed up slightly Friday with the breakout holding for now. 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.