Research Notes for May 29th

MARKET STORIES:

What happened to the buyers? The worries over Europe, interest rates and anything else you would like to put in the headlines prompted some selling, some buying some selling and in the end stupidity rules. Nothing really changed at the end of the day some digesting of the move from Wednesday and we move to tomorrow with an eye out for direction. The sideways movement remains the challenge, but in the end we still have to be patient enough to let this play out. Last night I posted ten ideas going forward and they put in perspective what needs to unfold moving forward.

Across the indexes we held the moves from Wednesday, but left plenty of question marks and answers will unfold with time.¬†Plenty of worries remain, some old, some new. The challenge for me is the lack of improvement in¬†any of the areas discussed the last three months… growth, earnings, sales, etc. It is a slow grind and investors are getting antsy about the outcome near term. We will continue to focus one day at a time and let it all unfold.

Below I address the sectors and broad market indexes as we see it now… there is plenty of news in the making and we have to aware of what could impact the markets short term.¬†Stay focused and maintain your discipline.

NOTE: The following are things to watch and evaluate during¬†the trading day…

  1. TLT bounced off the $118.50 support and now looking at the upside trade. TMF is leveraged ETF. entry $74.95 watch on Tuesday. HIT entry at $75.20 early. Put stop at $76 currently.
  2. EWG – move higher failed… now looking for the recovery bounce off support at the $29.30 level. Weakness from Greece story. revise entry to $29.80 on bounce off support.
  3. CPI spiked 0.3% on the core and it is credited to the rising cost of HEALTHCARE? What about ACA (affordable care act)? Not working… prices are only going to go higher as we move forward with the full implementation of the bill. This was the projection and no one wanted to listen… Better buy healthcare stocks if you want to afford healthcare. IHF, XPH, XLV are rising. Look for entry point on each with break through the resistance near term.
  4. SOCL – attempting to regain upside move. $20.60 breakout.
  5. FDN – tech moving and internet is part of the move higher. Breakout at 67.70. Hit entry and stop at $66.75.
  6. IYZ – telecom moved to support at the $29.70 mark. Bounce or break lower? The break lower takes out the trendline from the October low and offers a short side trade opportunity. Look for entry at $30.25 if upside continues today.
  7. XLK break to new high as technology ready to follow through on the upside move. Leading the NASDAQ higher short term. Entry $0.60 on test or max entry $44.
  8. Biotech (IBB) attempting to move higher again with $366 level of resistance level to take out. Use that as level of entry for s short term trade on the break higher.
  9. Small caps ready to move higher and break above the consolidation. $90 entry if we follow through on TNA. This is the leveraged ETF for the sector.
  10. SVXY continues to move higher as the worries find peace for now. Watch the upside trade opportunities.

MAJOR INDEX STORIES:

S&P 500 Index (SPY) index fell 1% and bounced 1% and flat essentially on Thursday to close at the $212.46 mark. Keep your stop on the older positions at the $204.50 level. The trends are still intact on the upside. Watching… and letting it unfold patiently. Inside day and looking for trend confirmation from the move.

NASDAQ 100 Index (QQQ) held above the $109 support Tuesday and thus continued to the new highs Wednesday. Upside remains in place with small test on Thursday. Keep stops at $104.40 on short term positions (3-9 month horizon). Trend is still in place and we proceed one day at a time.

Russell 2000 Index (IWM) The index moved back above¬†the¬†$123.75 move. The¬†stop at $122.50 on trades taken on that move held barely on trades. October trendline not recovered and still watching. Downside below $118.80 is stop on previous trades. Don’t assume anything as this unfolds… except volatility short term.

Volatility Index (VIX) Closed at 13.3 and still not showing much in terms of anxiety. Let this unfold and watch SVXY based on the recovery Wednesday. Watching to see how this unfolds. Unless some news shifts the trend buyers are in control for now.

Transportation (IYT) Closed below the $154 support to¬†end the week… followed through on the selling to start the week… 50 DMA crossed below the 200 DMA as technical sell.¬†The index is on the downside short term and¬†still not back in the previous range and the negative for the Dow is still being watched.

Dollar (UUP) shifted gears again back to the upside as worries in Europe return over Greece. Throw in some speculation about the global economies and the bond buying program in Europe. $25.10 level cleared on upside to the dollar. EUO nice trade follow through to short the euro. Adjust your stops to protect your gains.

Crude Oil (OIL) Selling is back as the worries over a stronger dollar and prices are back below $60. Left a doji on the close Thursday and could point to a direction resolution. The rig counts are down, supplies are up, demand is flat and the uncertainty is in play. Sidelines are where I will stay for now.

SECTOR STORIES: 

Alibaba (BABA) upside gap on earning is testing. Still plenty of debate on the outcome, but the consolidation on the move higher gives entry for trade at $88.60. Watching how it unfolds following the volatility. Breakout and entry at $88.60. Stop $90. Let it unfold. Weakness in FXI is hurting near term and we continue to watch for the upside to play out. Patience.

Regional Banks (KRE) – breaking higher from the trading range short term. $41.85 entry level¬†hit¬†and I like the upside if rates hold the move higher. $40.70 is the stop… Still not a picture of¬†strength short term, but we will let it play out. Nice bounce on Wednesday and held on Thursday… need upside confirmation.

Software (IGV) leading sector for tech. Watch the micro term pattern setups¬†as the break higher¬†for the sector and¬†moved above the $100 level.¬†Keeping the uptrend in play… manage positions. Selling Tuesday is to be watched and stops in place at $100. Bounced back and looking for continuation of the upside short term.

Consumer Discretionary (XLY) ¬†Need to hold support at the $74.50 level (check) to keep¬†the trend moving higher… break above $77 would be of help for the trend to continue upside move. Consumer is not spending (April report lower than expected and still no clarity for the sector overall). Sentiment is declining (consumer sentiment report May). $74.50 exit point on the downside. Patience is necessary near term.

Financials (XLF) This sector is all about Fed speculation. Will they raise interest rates¬†or not. Manage the risk and look to see how this plays out near term. This is one sector in favor of higher rates.¬†If that is true, we would want to hold long term positions… wide stops and ignore the volatility based on speculation¬†from analyst. Focus on what you believe. Stop $23.80. Maintain longer term view for sector. Inside bar on Thursday and looking for decision today as this unfolds.

Healthcare (XLV) РFound support at the $71.25 mark and cleared $73.25 resistance Heading towards new high as the confidence returned to the sector. Watching the selling on Tuesday? $73.50 needs to hold micro term (check). Short term $71.25 level to watch or move above the $75.25 level of resistance.

Bonds¬†(TLT)¬†We bounced off the $118.50 support last week? The upside follow through on Thursday would say yes… Watch $120.50 for upside trade. Hit the entry for trade and stop moved to $120.35¬†on the move higher Tuesday & Wednesday. Let this unfold and manage your stops short term.

Energy (XLE) Broke support at the $80.50 mark. Again the negative sentiment returns to the sector. We have not added positions yet, but we will watch for the next opportunity as this unfolds. $77.70 now the support level to watch. Held Thursday and closed with a doji?

  1. Tesoro (TSO) breaking through resistance at $90.40 and testing the move. Entry on test or $92 continuation upside (ADDED Monday). Stop at $88 and looking for target move of $104.
  2. BP РBounced off the January low and has been working higher. I like the move above the $42 resistance and the 200 DMA. This is a long term view for growth. If we hold support near this level ($41.25 adjusted for the move Tuesday) and moves higher I am willing to add the positions with a 18+ month outlook. 5.6% dividend payment. Nice follow through to the test and hold of support.

Retail (XRT) – Data isn’t helping, revenue, earnings, you name it has not helped build confidence in the consumer. Let it unfold… $99.60 is resistance… move back above the $100 mark gets interesting. Stock pickers sector as the earnings are hit and miss driving direction. Sold lower on Tuesday and modest bounce on Wednesday and Thursday?

Industrials (XLI) – if (and that is a big if) the global economies continue to recover and growth takes root… industrial stocks should rise from the dead. This story will take time to validate, but it is one worth our attention as we move forward.¬†Trading range and downtrend off the February high are the key issues for entry. ($56.80 level to watch.) Hit the entry point with move higher… still plenty of long term opportunity. Stop $55.20.

Semiconductors (SOXX) this is still messy charts, but turning into a trading range and looking for the break higher ($96 for entry hit).¬†Manage the risk of the volatility in the sector. Watching how it plays out out to start the week. $95 stop on noise. Tuesday… held up better than the indexes on the selling… patience for now. Wednesday confirmed the move higher with gain of 3.7% to push to new high!

  1. INTC – $33.50 is entry on breakout for the stocks and willing to add again for the upside move. Hit the entry on the move higher Wednesday… Stop $32.50.
  2. NXPI – nice move to break from the trading range (entry $104.50) and test the March high. looking for follow through and opportunity. stop $101. Nice follow through on the upside currently.

“Vision without action is a daydream… Action without vision is a nightmare.” Japanese Proverb.