Trading Notes for Today, June 4th

The ISM manufacturing data on Monday was a big disappointment, but the thrill of more money from the Fed offset the let down. I stated in my comments in yesterday’s notes to watch sentiment this week in trading and that is what we are seeing already, good feelings over the Fed providing more stimulus outweighing the disappointment of the economic data. Isn’t that how this rally started in November? Emotions are in control again.

Proceed with caution, take what the market gives and don’t over think or stay you welcome.

Sectors to Watch:

  1. China PMI at 49.2 for May and worst since October. The news from China did raise questions ,but the negative tone didn’t last on Monday. The short play in FXP pulled back as buyers stepped into the markets to bid up Chinese stocks. Watch the stops on the trade today.
  2. Anything positive out of Europe may send their stocks higher. This is an area that looks decent on the upside. IEV, tested $41.60 support on Friday, but stocks are bouncing back this morning as banks lead. Watch for the potential upside and a move back above the $42.15 level.
  3. Gold reversed again back to the resistance. Entry at the $137 level on GLD is what we are looking for short term. Sector Rotation Model.
  4. Semiconductors (SOXX), Banks (KBE), Short Emerging Markets (EEV) and Corn commodity (CORN) are updated and added to the ONLY ETF Watch List. Hit stops on DTO and ZSL. Manage the two remaining short plays on the portfolio.
  5. Short Natural Gas (KOLD), Gold (GLD) are updated and added to the Sector Rotation Model Watch List. Short plays have to be managed relative to the upside today. Watch to see how this unfolds this morning.
  6. S&P 500 Model is seeing some rotation in the index. Raised stop on SH and added SPY if the Fed sentiment shift sticks as play on the upside.
  7. The VIX jumped above 17.5 early, but settled back at the 16.2 mark on the close. Watching VXX and SVXY as opportunity depending on how the current movement settles out.
  8. Facebook – No positions currently. The sentiment towards the stock remains negative, the bounce off the low at $23.36 Friday didn’t last as Monday saw the sellers return. Looking for a base or range to be established short term. Time to be patient and let some direction develop before adding any position.

Pattern Setups For Today:

  1. LULU – Flag consolidation with a break above $80 a positive on the upside.
  2. AMZN – consolidation break above above $272.
  3. JDSU – Consolidation break above $13.80.
  4. VMW – Break of consolidation pattern (trading range) lower. Short trade to $60.
  5. Follow up from Yesterday’s List:
  6. GNW – break from consolidation to new high. $11.05, target $11.70.
  7. PALL – Still in play on break above $73.85 resistance. $76.50 target.
  8. PACB – Break above the top the trading range. $2.65
  9. CRAY – Cup breakout at $18.05, initial target $18.85 and then 20.20.

All investing comes with risk. Our job as investors is to manage the risk. Markets remain choppy and directionally challenged for now. Keep your focus and discipline in place.