Jim’s Market Notes:
Friday was a sign of negative sentiment and sellers gaining some momentum on the jobs report and a stronger dollar. The jobs report was much stronger than expected and that sent a chill towards interest sensitive stocks and large caps. The challenge comes from investors still not buying into the Fed story of raising rates later this year. The economic data has not been exactly strong, but the continued decline in the rate of unemployment has traders and investors starting to become believers. That is putting the brakes on the market at least for now.
The key word is uncertainty. When it is present in the markets the first response is sell first and ask questions later. That was Friday. Now we ask the questions and determine how it will unfold going forward. The key for you as an investor is to trade your plan not your emotions. Follow you discipline and maintain your sound trading habits. If you get stopped out of positions and they move up again… you can always buy them back. NO ONE, that is right NO ONE, knows what is going to the right side of a chart. Trade your plan.
NOTES OF INTEREST:
Overbought believers are screaming from the roof tops… the sky is falling! Reaction to jobs report or new downside test developing? That is what we have to define this week in trading.
S&P 500 index (SPY) broke $209 support and $206.15 next level to watch on downside along with the 50 DMA.
NASDAQ (QQQ) testing the $107.20 support? $106 is the real key to hold going forward.
Russell 2000 (IWM) fell to first support at $121.20. I was mad on Thursday after hitting stop on Wednesday, but it is showing now why the downside risk is alive. $119.28 next level to watch.
Financials (XLF) back to support $24.20 with the 50 DMA and $24 levels to watch.
Banks (KBE & KRE) attempt to break higher on the jobs report Friday. Upside potential is present, but financials are still not healthy yet. KRE $41.06 level to clear on the top side.
Semiconductors (SOXX) fell to $96.60 support and $95.06 is next. Climax run on Monday has reversed to give it all back.
Transportation (IYT) broke the 50 DMA to confirm micro trend shift lower.
Utilities (XLU) break key support at the 200 DMA dropping 3%. Interest sensitive asset and as one analyst stated, the sector is trading more like a growth sector. It has now erased 12.4% since the high on January 29th.
Transports (ITY) broke the 50 DMA and still not looking healthy.
REITs (IYR) Wow! interest sensitive assets are getting hit. 200 DMA is possible support.
Dollar (UUP) big move on upside. Strength getting bad reviews from the multi-national stocks. Didn’t hedge the swing higher correctly. Hurting oil and gold prices as well… as expected.
Euro (EUO) remains under pressure and the short trade resumes the uptrend after five weeks of consolidation. Hurting the IEV trade scenario. HEDJ winner with this combination of events.
Bonds fell as yields were rising this week and jumped 12 basis points on Friday alone. The Fed is gaining traction on belief they will hike rates this summer. The thirty-year bond is now at 2.83% and the ten-year is 2.24%. We continue watch with a focus on yields rising and bond prices declining. TBT added last week.
Crude oil (OIL) supply data was better than expected and jumped higher mid week. Data on Friday pushed it lower again as dollar is gaining strength again. I state again the volatility is news driven and makes for a trading environment only. Addding UCO to the ONLY ETF Watch List.
Gasoline (UGA) testing the micro trend on the reversal. $36.50 first support, then $34.50 next level to watch. Trendline is the key from my view.
Gold (GLD) attempted to push back through $116.50, but failed to hold the move. Now raises the question of base building or reversal? Watched for a trade on the upside, but also the downside break would set up a short trade if breaks back below the previous low ($115). Broke Friday offer a short trade on the move. Added DUST to the pattern trading strategy below.
Action Taken: “Vision without action is a daydream… Action without vision is a nightmare.” Japanese Proverb.
Adjusted stops on positions in play as Friday’s move lower is warning sign break below the 30 DMA and testing the 50 DMA again.
Hit stop on IJH, SPY, IWM, SVXY in the pattern trading strategy. Adjusted stops on others to protect gains if selling continues.
Added DUST to pattern trading strategy.
We discussed the fact that all the major indexes are showing signs of topping short term. Friday took those same sectors below their respective 20 DMA. The test lower is now bringing into play the breakout levels from three weeks ago. The S&P 500 index closed below the 2090 mark and is testing the 2063 support level from the previous trading range. This is where my attention lies heading into the week of trading. Support gives way at the second level this worse than initially expected on the test of the move above 2063.
Biotech (XBI) showed the large caps were alive hitting a new high clearing the $218 resistance from the last week and gapping higher. IBB posted a solid gain as well clearing the $342 resistance mark. Some selling Friday with the broad markets… watch and mange the downside risk.
Treasury bonds fell again on the rise in interest rates. The Fed continues to convince investors they are ready, willing, and able. TMV or TBT the short trades relative to rates going higher short term. Big confirmation move on Friday relative to the jobs report.
Solar (TAN) continuing the upside move with a follow through above the 200 DMA. Big move higher again on Thursday as the sector remains a reborn leader short term. The selling on Friday was part market part overbought. As stated lock in some profits and manage the risk going forward.
Money Management Strategies Links:
- S&P 500 Strategy
- Sector Rotation Strategy
- ONLY ETF Strategy
- ONE EGG Strategy
- Pattern Trading Strategy – Below
- Long Term Strategy – Below
Pattern Trade Setups:
- First move to support and some indexes broke to test second level of support. Not what you want to see in an extended uptrend. Sentiment is still positive, but Friday did take a toll on investor psyche. Monday is key to how this unfolds. Don’t assume anything, plan and trade your plan.
- Some nice upside set ups in technology and financials… watching how today plays out first to determine how we trade.
- CY – entry $15.50. ascending triangle consolidation. Break above resistance offers nice upside move in leading sector. Stop $15. Target$17.20.
- SDS – entry $21.50. bottom reversal. Index drop below $209 and could move lower. Start as hedge position and will add if it confirm with move above the $21.80 level. Stop $21.05. Target $23.50.
- TZA – entry $11.30. reversal low. Index fell to support and if breaks willing to add the downside trade. If confirms at $11.62 we will add to the position. Stop $11.05. Target $12.
Pattern Trade Tracking:
- DUST – entry $15.60 ($17 @ open). breakout bottom range. Metal is testing support and the miners are as well. The short trade is just that a trade on the next move lower in the metal. Stop $17.60. Target $25. Added based on the news driving the move… stronger dollar and Fed prepared to hike rates. Let it run and keep stop in place.
- JD – entry $28.25. Cup pattern. break higher for the sector and the stock has been one of the methodical leaders the last two months. Stop $27. Target $33. Gapped at the open and sold… watching how this follows up today following a solid earning report.
- PXLW – entry $5.40. uptrend test consolidation. In position to continue the uptrend off the December lows. Stop $5. Target 6.50.
- STMP – entry $59. Flag pattern. Follow through on gap higher is the entry. Stop $55.70. Target $62.50.
- VMW – entry $86. reverse head and shoulder breakout. Stop $83.50. Target $92.50.
- TSEM – entry $16.50. Weekly chart breakout of bowl pattern and 2012 high. Semi’s taking on leadership role in NASDAQ. Stop $16.75. Target $19.50
- FB – entry $80.25. pennant break upside. in mid consolidation phase. looking for upside trade on move. Stop $77.
- NKE – entry $95.50. trendline break upside. Retail remains a leader and the resumption in momentum for Nike is a trade. Stop $95.50. Target 99.40.
- SUNE – entry $22.55. triangle on weekly chart. Resumption of the longer term uptrend potential. Stop $21.40. Target $25. ADDED to TRADE Below.
- AMBA – entry $55.25. micro trend reversal. Tested support at $50 and looking for reversal and longer term uptrend to resume. Stop $63. Target $60.20 (HIT).
- GMCR – entry $122.80. bottom reversal. Move to the 200 DMA and then look for break of trendline higher. Stop $126. Target 139.60.
- CIEN – entry $20.25. consolidation range. biotech making move higher to resume uptrend. Leading sector again? Stop $20.25
- INFI – entry $15.15. wedge consolidation breakout. biotech has been struggling of late, but looking for upside to resume. Stop $15.15
- SUNE – entry $21.20. trading range breakout. Semi’s are moving higher and regaining leadership role. Target $23. Stop $21.20
- SVXY – entry $57. Downtrend line break. Broke the uptrend line on VIX. The short trade as the momentum shifts is the trade currently. target $61.50 (HIT). Stop $63.40 – raised stop and managing the risk, hit the target. HIT STOP
- C – entry $49.80. break from double bottom base. Upside momentum in the sector short term. $52.50 target on move (HIT). Stop $52.50 target protected.
- AKAM – entry $64.50. double bottom breakout. Looking for move back to the previous high if technology resumes leadership role. Took position on opening strength today. Against my emotions, but I like the earnings. Stop $69. Manage the stop and let this unfold on direction.
- NXPI – entry $82.30. trading range breakout. The earnings report helped the upside and looking for the follow through short term. Semiconductor sector. Target $88 (HIT). Stop $96. Merger news sends stock flying. Stop up and protect the gains.
- F – entry 16.12. trend reversal and break above 200 DMA. upside momentum from sales and target of $17.25 in play. Stop $15.80
- NFLX – entry $460. trading range or flag breakout. Confirmation of the upside move from earnings in the consolidation. $485 target short term. Stop $460. HIT STOP
- IJH – entry $147.25. Breakout from range. The move would put the sector at a new high and the leadership role. Stop $149 HIT STOP
- IWM – entry $119.50. break in range. The move through this level puts the upside back in play and expect leadership from the sector going forward. Stop $121.25 HIT STOP
- SPY – entry $204.80. Range trade. Looking for move back to the previous highs on the positive sentiment. Stop $209. HIT STOP
- FSLR – entry $45.50. Bottom range breakout. Alternative energy sector bouncing with oil. Look for trade to $52 if momentum follows through. Stop $59.50. Gapped higher and adjusting the stops with the target hit.
- WFM – entry $48. Flag. Longer term outlook very positive off earnings. Look to hold this position going forward. May add to our long term strategy below. Stop $54.60.
- 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 short term still in play, but broad markets selling won’t help.
- 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 short term trade to $42.25. Stop for added shares raised to $46.25. This is a long term holding, but we will trade on short term technical data if warranted. Gapped higher on earnings and so far holding the move. TODAY: Watching stop on the traded shares above (#3). Testing move on upside and watching how it unfolds short term.
- 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: Banks get a bump higher on the jobs report which in turn would reinforce the Fed hiking rates and that is good for banks. Puts stock back over the $16.20 resistance and $16.70 is next. Watching how this unfolds in light of the selling in the broad markets.
- Whole Foods Market (WFM) (1) Added 1000 Shares @$48 11/20/14 starting position. 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. So far so good on the sequential earnings period. TODAY: Upside is rolling over. Nice bounce on Thursday to help the cause, but hit by Friday’s selling in the broad markets. This is where the challenge comes in owning a long term position, dealing with the downside risk. The breakout on earnings was at $53.80 an we are going to use that as a stop for now. If we get stopped out we would look for the reentry point point and go from their. Patience as the selling is on lower volume.