Trading Notes for Today, June 5th

Jobs data will begin today with the ADP report on the private sector. The expectations are not for much change relative to jobs. The real focus is on the Federal Reserve and the comments from all the Fed Presidents on stimulus cuts. September is being set as the benchmark. If that is a true target and the reality become clear… the markets are going to react in negative fashion.

As seen in yesterday’s trading, investors are becoming preoccupied by the Fed’s potential action or inaction relative to quantitative easing. Fed President, Mr. Fisher, stated yesterday in his comments, the market is hooked on “monetary cocain” from the Fed, and the Fed could not worry about the markets reaction. He has been very vocal about the need to stop the stimulus. Tapering of the stimulus is coming… it is just a matter of when.

The futures are down this morning as I post this update and the overhang of the Fed obsession isn’t going away short term. Proceed with caution, take what the market gives and don’t over think or stay you welcome.

Sectors to Watch:

  1. Japan jumped back into the headlines with the promise of further economic reform. EWJ was up 2.9% on Tuesday and is trading down this morning as the reality of what it will take to implement lasting change in Japan. The long term outlook for Japan is positive, but it will come with plenty of volatility as the plans are implemented. The yen (FXY) is bouncing off the low and is interesting as a trade relative to the dollar short term. I continue to look for a entry point.
  2. The ISM Services data is out today along with the ADP jobs report. Will either take away the focus on the Fed? Not likely, bu they could add some positives to what is building to be a negative market environment.
  3. Gold reversed again continues to flirt with the upside short term. 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 for the ONLY ETF Watch List. Manage the two remaining short plays on the portfolio.
  5. Short Natural Gas (KOLD) and Gold (GLD) are updated on the Sector Rotation Model Watch List. Short plays have to be managed based on the volatility of the outlook.
  6. S&P 500 Model is seeing some rotation in the index. Watch the short play SH as the downside builds some sentiment. Watch VXX or SVXY trade opportunities here as well.
  7. Facebook – No positions currently. The sentiment towards the stock remains negative, the bounce off the low at $23.36 Friday is settling in, but the stock is in need of a catalyst in either direction as support is holding for now. 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. AMD – Flag consolidation with a breakout move at $4.10.
  2. DECK – Cup & Handle pattern. Looking for move above $55 as entry.
  3. IYT – Head & Shoulder neckline break lower ($113 break and test)? This is a negative pattern on the downside, but it is also an indicator for the broad markets. Watch the short play.
  4. AMZN – consolidation break above above $272.
  5. JDSU – Consolidation break above $13.80.
  6. Follow up on previous posts:
  7. LULU – Flag consolidation with a break above $80 a positive on the upside. Made move. next obstacle $82.
  8. VMW – Break of consolidation pattern (trading range) lower. Short trade to $60. Broke lower in play on downside short term.
  9. GNW – break from consolidation to new high. $11.05, target $11.70.
  10. PALL – Still in play on break above $73.85 resistance. $76.50 target.
  11. PACB – Break above the top the trading range. $2.65
  12. CRAY – Cup breakout at $18.05, initial target $18.85 and then 20.20. Nice follow through Tuesday.

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.