Jim’s Market Notes:
February is in the books and the markets close higher for the money as February makes up for January’s losses. All is good… right? I am growing partial to the word comfortable. The VIX index reflects the comfort level investors have currently as the worries that have been in the headlines are missing – but, not forgotten. One wrong turn or one unexpected comment and they will be back in the forefront with renewed worries from all.
Economic data continues to be unimpressive to say the least. But, the market indexes continue to post new highs… but, even that lacks power.
NOTES OF INTEREST:
Jobless claims back above the 300k level was not a good sign short term. Layoffs? Energy sector continues to cut and that has to be impacting the jobs to some extent. The Jobs report is out Friday for the month of February… could off some insight.
Chicago PMI hit 45.8 well below the 58 expected. The manufacturing numbers from the regional data has been much weaker… What happens with ISM manufacturing number on Monday will be of interest as well.
GDP data at 2.2% for Q4… this is not the kind of growth you would expect for a healthy recovery. One interest piece of data to add to this argument on GDP growth in the US… The affordable care act is pushing up GDP. The forced spending on healthcare is adding to the GDP, but it isn’t really adding growth to the economy as it is premium increases. Spending rose to 21.4 billion dollars in Q4 or 18% of all spending was on healthcare. The increases in spending since enacting the Affordable Care Act has been substantial… interesting that isn’t in the headlines. Any wonder healthcare stocks have been the top performing sector? Interesting article in IBD on this very topic worth reading.
Stock buybacks and dividend raises continue to drive stock prices despite the outlook for growth in the economy… what happens with that merry-go-round stops? Watch and be forewarned on the issues facing stocks longer term. Stops are key regardless of your belief.
Bonds fell as yields were rising, but last week showed interest from the buyers pushing prices higher as yields dropped. The thirty-year bond is now at 2.6% and the ten-year is 2%. We continue watch with a focus on yields rising and bond prices declining. TBT is of interest this week to add again if bonds decline.
Crude oil worries about supply resurfaced and the base building continues for both the commodity and the stocks. Still not willing to accept the risk or uncertainty in the sector, but willing to see how it unfolds and what opportunities result.
Gasoline (UGA) broke higher on the strike concerns cutting into capacity and supply. The move Friday shows the building speculation short term. Heating oil (UHN) continued to move higher as well on colder weather and consumption. The strikes will impact this pricing as well if they expand and continue longer than anticipated.
Gold (GLD) attempted to push back through $116.50, but failed to hold the move. Now raises the question of base building or reversal? Watching this week for a trade on the upside if it follow through or a short trade if it breaks back below the previous low ($115).
Action Taken: “Vision without action is a daydream… Action without vision is a nightmare.” Japanese Proverb.
Adjusted stops on positions in play as we head to the new week of trading. I am expecting the upside to remain in play, but we have to plan for the unexpected should our beliefs not play out as expected.
NONE added on Friday.
NASDAQ Index is in position to hit new highs going back to 2000. The large cap stocks in the index are doing their part to make that happen short term. IF we break higher from the flag pattern on the upside we will take a trade in the move short term. (ONLY ETF)
Energy (XLE) fell below the $80.50 mark and watching how it responds to crude oil prices. Break of support could set up a short trade opportunity if crude continues to stumble… worth watching near term.
Emerging Markets (EEM) in position to break from the current range and attempt for a reversal of the trend longer term. The leveraged trade for this would be EDC. If we can make the move higher and hold interested in the upside trade short term. (ONLY ETF strategy)
Europe (IEV) moved higher and $45.35 is level to add to positions if you are willing to accept the risk. EWG cleared $29.25 entry point. EWK cleared the $17.10 entry point. EIRL is moving vertical. EWH in position to break above the $22 mark. (ONLY ETF)
Watching how this week unfolds as the drift higher has been of showing some signs of weakness, but we don’t assume anything we follow the trend and look for what validates or shifts as we move forward. Markets remain in uptrend, but caution is advised along with managing your stops.
Money Management Strategies Links:
- S&P 500 Strategy
- Sector Rotation Strategy
- ONLY ETF Strategy
- ONE EGG Strategy
- Pattern Trading Strategy – Below
- Long Term Strategy – Below
Pattern Trade Setups:
- Broke to new highs with a gradual drift higher last week. Question is will the upside continue? The sentiment is positive, the money flow is positive and outlook is neutral. We continue with our stance of taking the opportunities and managing the risk as it unfolds.
- EDC – entry $25.40. break from consolidation range. picking ups some momentum in the sector and we will have to manage the risk of the trade. Stop 24.10. Target $28.
- JD – entry $28.25. Cup pattern. break higher for the sector and the stock has been one of the methodical leaders the last two months. Stop $27. Target $33.
- TSEM – entry $16.50. Weekly chart breakout of bowl pattern and 2012 high. Semi’s taking on leadership role in NASDAQ. Stop $15.35. Target $19.50
- ATHM – entry $39.90. Trading range bottom breakout. Move above the 200 DMA would be a positive on the move from the trading range. Internet space is leading currently in technology sector. Stop $38. Target $44.
- SRS – entry $12. Bottom range reversal. the downside of REITs continues to rise with the threat from interest rates rising. Test of the breakout offers entry point short term.
Pattern Trade Tracking:
- FB – entry $80.25. pennant break upside. in mid consolidation phase. looking for upside trade on move. Stop $77.
- NKE – entry $95.50. trendline break upside. Retail remains a leader and the resumption in momentum for Nike is a trade. Stop $94.25. Target 99.40.
- SUNE – entry $22.55. triangle on weekly chart. Resumption of the longer term uptrend potential. Stop $21.40. Target $25. ADDED to TRADE Below.
- AMBA – entry $55.25. micro trend reversal. Tested support at $50 and looking for reversal and longer term uptrend to resume. Stop $54. Target $60.20.
- FAS – entry $126.70. resistance break. continuation of the double bottom reversal following test. if upside continues financials join the party. Stop $124. Target $133.
- GMCR – entry $122.80. bottom reversal. Move to the 200 DMA and then look for break of trendline higher. Stop $119.50. Target 139.60.
- CIEN – entry $20.25. consolidation range. biotech making move higher to resume uptrend. Leading sector again? Stop $19.60
- INFI – entry $15.15. wedge consolidation breakout. biotech has been struggling of late, but looking for upside to resume. Stop $14.75
- SUNE – entry $21.20. trading range breakout. Semi’s are moving higher and regaining leadership role. Target $23. Stop $21.20
- SVXY – entry $57. Downtrend line break. Broke the uptrend line on VIX. The short trade as the momentum shifts is the trade currently. target $61.50. Stop $61.20 – raised stop and managing the risk, hit the target.
- C – entry $49.80. break from double bottom base. Upside momentum in the sector short term. $52.50 target on move. Stop $49.15
- AKAM – entry $64.50. double bottom breakout. Looking for move back to the previous high if technology resumes leadership role. Took position on opening strength today. Against my emotions, but I like the earnings. Stop $67.50. Manage the stop and let this unfold on direction.
- NXPI – entry $82.30. trading range breakout. The earnings report helped the upside and looking for the follow through short term. Semiconductor sector. Target $88. Stop $82.30
- F – entry 16.12. trend reversal and break above 200 DMA. upside momentum from sales and target of $17.25 in play. Stop $15.80
- AMD – entry $3.07. trading range breakout test. Broke higher and testing the move in pennant pattern. Upside trade on the confirmation. Stop $2.93.
- NFLX – entry $460. trading range or flag breakout. Confirmation of the upside move from earnings in the consolidation. $485 target short term. Stop $460.
- IJH – entry $147.25. Breakout from range. The move would put the sector at a new high and the leadership role. Stop $147.25
- IWM – entry $119.50. break in range. The move through this level puts the upside back in play and expect leadership from the sector going forward. Stop $118.50
- SPY – entry $204.80. Range trade. Looking for move back to the previous highs on the positive sentiment. Stop $206.50
- FSLR – entry $45.50. Bottom range breakout. Alternative energy sector bouncing with oil. Look for trade to $52 if momentum follows through. Stop $52. Gapped higher and adjusting the stops.
- WFM – entry $48. Flag. Longer term outlook very positive off earnings. Look to hold this position going forward. May add to our long term strategy below. Stop $52.50
- Facebook (FB) – $73.15 entry (10/16/14) added 1000 shares back relative to the long term outlook following the choppy drop in markets. Earning remain good, but the outlook showed higher costs and has kept pressure on the shares to stay in the current trading range. > Added to position: 500 @ $77.50 – 1/8< TODAY: Holding above support and finally made move on the upside breaking above $80.50 only to reverse on Friday. Watching how it unfolds this week.
- Twitter (TWTR) – (1) Added 500 shares at $42.80 (10/28/14). (2) Added 500 shares at $39.20 on 1/9/15. (3) Added 500 shares at $40.25 for short term trade to $42.25. Stop for added shares raised to $46.25. This is a long term holding, but we will trade on short term technical data if warranted. Gapped higher on earnings and so far holding the move. TODAY: Flag pattern of consolidation on the gap higher in play and willing to let this unfold short term. Raised stop on the traded shares above (#3).
- Bank of America (BAC) (1) Added Jan 2016 $17 Calls at $1.15 (avg price)/300 contracts. (2) Added 2500 shares at the $16.35 mark on 10/21/14. Banks are gaining some ground on the proposed hike in interest rates and I still like our position going forward as we practice patience. TODAY: Broke support again along with investor resolve. More issues with lawsuit settlements sends people to the exits. Puts or short sale short term is looking good?
- Whole Foods Market (WFM) (1) Added 1000 Shares @$48 11/20/14 starting position. The outlook has improved after making changes to the stores and adding new stores. The earning validated what I have been following for the last year and the company should be at the front side of a long term upside based on fundamental growth. So far so good on the sequential earnings period. TODAY: Upside remains in play following earnings and looking for this to hold the course on a steady climb.