Sellers Step Up Effort to Control Direction

The sellers take control after a positive open and put investors on notice they may be here for the near term. Retail sales were positive for February and put some positive spin on the futures. Like yesterday, the opening direction didn’t hold and the reversal started in the first 10 minutes of trading. The negative sentiment hit our entry points on the short trades posted to the ONLY ETF Model. That said, I am not convinced a firm decision has been made on direction, and there is still plenty of worries and hope being spread through the media. News is driving and the traders are happy. The investors are worried as the rumblings about the downside risk is getting louder. This is the type of market you deal with one day at a time and keep going forward.

Retail sales were up 0.25% for February which was the first positive month in the last three. Despite the positive report, sales are still on pace to be weaker in Q1 than they were in Q4. The reason for that of course is the winter weather:) Had to say it, sorry for the humor. We will know soon enough as the first quarter inches closer it’s end along with old man winter.

Amazon started off with a nice gain of $10 on the news of the increase in Prime to $99 or a $20 bump. That would increase revenue more than $340 million for the company. The question is whether customers will keep the service with the price increase. The news out today was unanimous for the most part that customers still thought the value was worth keeping it. Thus, the bump higher in the stock price. However, due the negative sentiment on the day the stock failed to hold the gain closing up 87 cents. It is still worth watching for a move back towards the $385 level of resistance as things sort out.

Treasury yields on the 30 year bond fell to 3.6% on the day as money was rotating to safety. That was enough to push TLT back to the $108.41 level on the day. The flight to safety may keep the bond prices elevated as the worry works itself out short term. I am still on the fence about any upside positions in bonds other than the trading opportunities they present. The risk remains to the downside and the Fed withdrawing stimulus as the catalyst.

Mortgage credit availability to more home buyers has been the trend of late as the data shows the highest level of availability since May 2o11. That is a plus for the housing market and the lenders. XHB, SPDR Homebuilders ETF has pulled back to support at $32.25 and it is another one to keep on your watch list going forward. If the home sales resume there upside move (after the winter polar vortex clears the area) this could set up as a opportunity to put money to work. The chart for REM, iShares Mortgage REIT ETF shows the positive impact on lending as the fund has moved up more than 10% off the January low. Banks like Wells Fargo, Bank of America, Citigroup and JP Morgan Chase all stand to benefit from the rise in fees. Less we forget home equity loans are growing again as well. Good news… Americans are borrowing more money on houses. Who says debt doesn’t promote growth.

I would be remiss if I did not put some blame for the selling today on the Russia/Ukraine issues (sort of like the weather, it is a catch all for blame). The bantering is not doing much to settle the situation and it is still the consensus that Putin will do whatever he wants and that is that. The threat of sanctions is empty and not likely to happen. Thus the only good play stock wise from this has been to be short Russian stocks. RUSS, Direxion Daily Russia Bear 3X was up 13.3% today as the selling accelerated on the news. The fund has nearly double since this issue started. Caution is now advised as the fund has gone vertical.

The key is to take what the market gives, and avoid the downside risk where possible. We continue to see rotation at work and anxiety rising among investors. At some point the direction will be resolved and the opportunities will be clear, until then stay focused, stay disciplined and trade your plan.