Trading Notes for Today – May 10th

Market is showing some signs of upside fatigue, but also seeing rotation into other sectors continue. On Thursday we had seven sectors move lower and three higher. The continued shuffling of money is in play and to be watched closely for clues going forward.  Utilities were the worst performer on the day dropping nearly 1.5% breaking support at $40.30. The sector is down 4% since Monday. This is the first negative activity for the any sector since the dip to the April 18th low. If the market sells or pulls back near term, watch for the buyers to step in again. There is still money that wants in and will pounce on the opportunity.

If the futures are indicative of the day, the six point decline on the S&P 500 index may draw money into the markets. It is Friday and there is no data to speak of ¬†outside of earnings. This could play out to be an interesting day overall. I would look for some intraday volatility. The “rumor” about the Fed has been stomped on overnight and buyers seem to be back and ready to buy.

Speaking of the rumor that caused minor disruption in the trading day, it is a good lesson for investors to learn how married this market is to the Fed stimulus and how liquidity is driving the market activity. 12 of 15 sessions on the upside can make for a nervous market as well. Thus, know where you stand with your positions and be disciplined in your approach to managing your portfolio.

Sectors to Watch:

  1. S&P 500 index down 6 points to 1626. One down day does make a top, nor does a down day that is barely reflected on the chart as a down day. Watching to see how investors react today. The futures are pointing higher, but that is always subject to change. Watching the VIX index to go with the activity to see if any additional signs of volatility increasing.
  2. Small Caps (IWM) to hold the $95 level with a target of $98 currently. For traders TNA target at $49.
  3. Gold seems stuck in a $2 range daily up or down. Watch $140.50 on the close today. A move below would be a negative and potential play in GLL next week.
  4. Crude hitting against resistance and near $97 level. upside in play, but the downside is setting up. $95 is level on the downside to break for short play. Not willing to chase higher here, but will look for the short play to set up going forward.
  5. Biotech (XBI) showing setup for reversal lower. Break below $103 a negative.
  6. Semiconductors broke higher on Wednesday? Held the move on Thursday? SMH to test the $38 level?  A short term (3-9 months) target would be $40 for the sector ETF.
  7. KRE was added as the EGG and fell flat. The breakout move on Tuesday was a big positive and we will look for follow through on the move again today.
  8. The bump in bonds on small yield decline is a test. Still some downside to go in bonds short term as yields work their way higher. TBF play remains a trade.
  9. China (GXC) broke above the $72.75 resistance and tested the move on Thursday. Target is  $76 and the test offered another entry point for the upside. Keep your stop in place at $71.50.
  10. Pattern Setups Carried Forward: 1) GRMN – Cup & handle pattern break above $35.75 still looks interesting. Still in position to break higher. ¬†2) BIDU – bottoming consolidation range. Break above downtrend line and some resistance at $90. NICE! good follow through on Wednesday & Thursday. Push your stop tight and see how it move today. ¬†3) SNSS – descending triangle break above $5.70 looks interesting. Still playing out. Watch the $5.03 support could bounce for intra-pattern trade back to the $5.50-70 range. 4) NTAP – down trending channel with break above $35.75. Nice move on Wednesday, but still looking for the follow through. ¬†5) TMUS – flag on gap higher. Move above $18. Made break on Thursday and looking for more. ¬†5) CLF – cup or saucer break above $22. Nice move higher on the breakout. Tested on Thursday, but still upside.¬†6) AAPL – $464 resistance? Break and continue higher? Test the previous downtrend line at the $450 level? Either sets up a upside trade… difference is entry point. Test is the favored trade. 7) CAKE – runaway gap follow through. Tride Thursday, still upside. 8) CLF – cup breakout at $22.15 with test on Thursday. Still upside play. 9) VXX – Low reversal move above $18.65 offers a trade on upside.

Market continues to set new highs and money flow remains high. Rumor test on Thursday was just that. Watch the activity on Friday, could see more intraday volatility. See rotation to the sectors with upside opportunities short term. Watch, manage and protect your money as this unfolds.