Trading Notes for Today – May 9th

Market is showing some signs of upside fatigue, but also seeing rotation into other sectors continue. On Wednesday we had five sectors move higher and five go sideways or down. Utilities were the worst performer on the day dropping nearly 1% back to support at $40.30. Telecom was the leader gaining 1.1% and breaking from flag pattern to continue the uptrend. Extended move of the April 18th low in play, use your stops and let this play out.
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Jobless claims today? Will they continue to surprise on the upside? Wholesale inventories and earnings will also round out the inside market data to offer a catalyst on the day.

There is plenty of talk supporting both sides of the argument for the upside and the economic recovery, along with the downside and it is a house of cards with no real substance. Over time both will be right. The upside is playing out now and eventually the downside will play out and be correct. The challenge for investors is knowing when it will happen. As with most things in life it is matter of time and timing.

Despite the moves to levels that don’t make sense fundamentally money continues to flow into the markets. However, it is not at that stage where is it finding other areas to flow to. Thus, money isn’t leaving the market it is rotating into the areas where there is deemed to be value. This can type of movement can last longer than you think or it can end tomorrow.¬†Therein¬†lies the challenge of climax runs in the market. Any pullback at this point will likely still be viewed as a buying opportunity. Stay the course and be disciplined.

Sectors to Watch:

  1. S&P 500 index up 12 of last 14 days. It is only a statistic, but investors watch them. Time for a test? Watch to see how it acts today. As stated above some movement within the sectors on the downside Wednesday.
  2. Gold posted a move back to the $142 level… still looking for decisive move up or down.
  3. Oil is was at $22.10-22.40, but moved above to $22.50? Down some overnight, but will it continue to advance higher? That is the big question for today. Not willing to chase higher here, but will look for the short play to set up going forward.
  4. Semiconductors broke higher on Wednesday? Follow through today? SMH to test the $38 level?  A short term (3-9 months) target would be $40 for the sector ETF.
  5. KBR 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 today.
  6. 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.
  7. China clears another hurdle on positive trade data. GXC broke above the $72.75 resistance and is heading higher. Target is now $76 and a test would offer another entry point for the upside.
  8. Pattern Setups (Wednesday recap): 1) GRMN РCup & handle pattern break above $35.75 looks interesting. Still in position to break higher.  2) BIDU Рbottoming consolidation range. Break above downtrend line and some resistance at $90. NICE good follow through on Wednesday. 3) SNSS Рdescending triangle break above $5.70 looks interesting. Still playing out. 4) NTAP Рdown trending channel with break above $35.75. Nice move on Wednesday, but still looking for the follow through.  5) TMUS Рflag on gap higher. Move above $18. Tried early, but closed in the flat. Still upside.  5) CLF Рcup or saucer break above $22. Nice move higher on the breakout.
  9. Pattern Setups Thursday: 1) 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. 2) ADBE – Breakout test. Moved above resistance at 45.50 with a possible test to $44.50, watch the upside play on the test of the break from consolidation. 3) CAKE – runaway gap follow through.

Market continues to set new highs and money flow remains high. See rotation to the sectors with upside opportunities short term. Watch, manage and protect your money as this unfolds.