Jim’s Notes Market Summary

Moving the Market – January 19th

The buyers push the S&P 500 and Dow to new highs. Large-cap tech led the upside move with semiconductors leading the upside burst the last two days. Small caps have struggled during the week but managed to find support on Friday. The focus from investors has shifted to what they deem positive, an accommodating Fed creating liquidity, slowing inflation, and positive news from the technology sector. Thus, ignoring the geopolitics and declining spending from the consumer. Glass half full. Technically speaking the charts show a market heading higher and in an over-bought state. That said, we take what is offered and manage the risk. We added position earlier in the we week and they have benefitted from the push higher. Plenty of issues in the headlines, but we will continue to follow the chart trends and let the talking heads deal with the pontification and speculation.

Stocks traded higher on the day as volume was above average. The buyers had the upper hand through the majority of the day closing at the highs. We will keep our stops in place and manage the risk accordingly. The NASDAQ closed up 1.7%, DIA was up 1%, and the SP500 was up 1.2%. The major indexes broke higher from their respective consolidation patterns to continue the uptrend. The SOXX was up 3.9%. Small Caps (Russell 2000) were up 0.9%. The ten-year treasury yield was 4.15% up 1 bps for the day. Crude (USO) was down 0.3%. (UGA) was up 0.1%. Natural gas (UNG) was down 6.4%. The dollar was down 0.1%. We are focused on managing the risk in the current environment and letting it unfold.

Charts to Watch: See Notes on “Reality of the Markets” & “Jim’s Beliefs About the Market” pages…

Quote of the Day: “When you try to be everything to everyone, you accomplish being nothing to anyone.” — Bonnie Gillespie.

Additional Charts To Watch

1) IWM has spent the first two weeks of the year moving lower. On Wednesday it confirmed the break of support at the $192.10 level offering a sell signal for the sector. We hit our stop at $198.60 early in the year and have been looking for the next opportunity… we bounced at the 50-day MA on Thursday. Followed through on Friday and looking for confirmation on Monday.

2) AAPL is resuming the uptrend and in a position to move above the July highs near term. Then came the downgrades and negative talk about sales of the iPhones… Testing the $180 level of support twice before BAC upgraded the stock and you can see the move back to $191. Amazing how on Wall Street you can make announcements to keep your portfolio on track and it is okay. Watching how this unfolds.

Sector Rotation And The S&P 500 Index

The S&P 500 index closed up 58 points to 4839 moving the index up 1.23% with above-average volume. The index broke from the consolidation pattern validating the continuation of the uptrend. Offered an opportunity to add to SPY at $477.75. Nine of the eleven sectors closed higher on the day with technology as the leader up 2.3%. The worst performer of the day was XLP down 0.3%. The VIX index closed at 13.3 lower on the day as anxiety goes away on the positive buying. Plenty to ponder between the headlines and facts. Patience.

XLB – Basic Materials Uptrend reversal in play with key support at $81. Held at support and was down 1.3% for the week. No Positions.

XLU – Utilities Broke back below the $69.20 support. $60.10 Next level to watch as well as short side trade opportunity. Entry SDP $12.85. Stop $12.70. The sector was down 3.1% for the week.

IYZ – Telecom Topping pattern on the chart that bounced back to the previous highs. A break above the $23 level would be of interest. No positions. The sector was up 1.3% for the week.

XLP – Consumer Staples Uptrend remains in place for the defensive sector with some modest testing. No Positions. The sector was down 0.7% for the week.

XLI – Industrials Topping pattern. $110.75 level of support to hold. No Positions. The sector was up 0.3% for the week.

XLV – Healthcare Made the move above September highs in a solid up trend from the October lows. Picked up some volatility of late but holding the trend. Entry $129. Stop $138.29. The sector was down 1% for the week.

XLE – Energy Entry ERY $29.90. Stop $29.30. Broke the bottoming trading range to the downside and looking for support. The sector was down 1.9% for the week.

XLK – Technology Entry $193. Stop $193. Bounce-off support at $183.50 and continued the uptrend closing the week at a new high. Large-cap tech is leading the broad markets higher. The sector was up 4.4% for the week.

XLF – Financials Entry $33.65. Stop $36.50. Trading sideways near the highs with a modest test lower. The uptrend remains in play as we manage the risk. The sector was up 0.7% for the week.

XLY – Consumer Discretionary Tested support $171.50. Double bottom pattern on the chart. Needs to clear $176.70. The sector was down 0.7% for the week.

IYR – REITs Moved below support and tested the next level at $87. Bounced Friday but still needs to find some buyers. The sector was down 1.4% for the week.

Summary: The index traded higher to end the week as buyer optimism returned. Yes, there are plenty of issues facing the markets both short-term and long. The buyers see the glass as half full currently and pushed the index to new highs. The uptrend from the October lows tested, held support, and resumed the upside move. Technology remains the leader near term. Plenty of rhetoric in the headlines as we watch the charts short term for direction. Trends resumed the upside move overall. Some trends are being challenged on the downside like XLE, IYR, and XLU. Letting it unfold and taking it one day at a time. Remember two things; first, the trend is your friend, and second, don’t fight the Fed…

(The notes above are posted at the end of each week based on activity from the previous week’s trading. The BOLD/ITALIC comments are the current-day changes worthy of note.)

Key Indicators/Sectors & Leaders To Watch

The NASDAQ index closed up 255 points to 15,310 as the index was up 1.7% for the day. The index tested the extension of the uptrend and moved into a consolidation phase. It broke higher on Friday with solid volume. The leaders are IGV, SOXX, and QQQ on the upside. The chart remains in a positive trend. Managing the risk that is and looking for opportunities.

NASDAQ 100 (QQQ) was up 1.98% for the day as the mega-caps maintained the trend and set the pace. The sector is seeing some juggling in leadership back to SOXX and IGV. Manage stops and let it play out. Entry $354.20. Stop $410. The sector was up 2.9% for the week.

Semiconductors (SOXX) Entry $563.80. Stop 585. Tested lower bounced… broke from the bottoming pattern on Tuesday and got the follow-through on Thursday moving back towards the previous highs which extended higher on Friday. The sector was up 7.4 for the week.

Software (IGV) Moved back to the previous highs and follow-through to resume the uptrend. The sector was up 2.7% for the week.

Biotech (IBB) Topping pattern on the chart and letting it unfold. Entry $121.30. Stop $133. The sector was down 1.2% for the week.

Small-Cap Index (IWM) Tested lower and broke support at the $192.10 level… managed to close back above support to end the week… watching how it unfolds. No Positions. The sector was down 0.6% for the week.

Transports (IYT) Broke support at the $254.50 level and bounced back as shipping took the lead in the sector. Red Sea issues continue to escalate. BDRY has done well in response, bouncing back from the test at $8.95. Up 17% for the week. The sector was down 0.5%.

Container rates hit $10,000 as ocean freight prices jump from Red Sea issues. 158 ships carrying approximately $105 billion in ocean freight have been diverted away from the Red Sea… inflation anyone? BDRY continues to climb on the news.

The Dollar (UUP) The dollar has bounced off the December lows and gaining some strength of late. The buck was up 1% for the week.

Treasury Yield 10-Year Bond (TNX) The yield has been creeping higher of late as the 10-year moves above the 4% mark again. TLT triggered a short-side opportunity TMV entry $32.10. Stop $33.50. The yield moved from 3.97% to 4.15% this week up 18 bps.

Crude oil (USO) Remains a challenge relative to clarity. Production has been higher than expected as OPEC allowed producers to have voluntary cuts. Iran and Russia continue to produce with the need of money. USO remains in a bottoming pattern. Weekly inventory showed a drawdown in supply and crude moved higher on the news. The commodity was up 1.7% for the week.

Natural Gas (UNG) The move higher from the December lows came to an abrupt end this week with natural gas falling on projected supply rising the first half of the year. Watched how the commodity responded to the news looking for a bounce to add a downside trade. We added KOLD entry $84.40. Stop $91.35. Natural Gas supply rose more than expected pushing it down further. The commodity was down 17.3% for the week.

Gold (GLD) The commodity dipped below the uptrend line with support at $183.72. The dollar gained some near-term strength adding downside pressure on the metal. Letting this unfold near term. The metal was up 0.03% for the week.

FINAL NOTES

Friday: The broad index resumed the uptrend with a solid upside on Thursday and Friday pushing to new highs. Technology remains the mainstay relative to the upside, but breaks lower in small caps and energy is being watched as well. The major indexes SPY, DIA, and QQQ are all extended but the sentiment is shifting to positive again. Plenty of issues on the table, not the least of which, is the Fed. The FOMC meeting is on the horizon and there is talk of the Fed shifting their balance sheet reduction to help liquidity issues in the banking sector which remain very much a concern. Taking what is offered and letting it all unfold.

Our longer-term view shifts as the indexes remain in an uptrend from the October lows. They had moved above the July and August highs and broke above the 2022 highs to a new high. This resumes the long-term uptrend from October 2022. The key currently is to let the short term unfold in light of the longer term perspective… don’t combine the two as the weekly charts look very different than the daily. A look at the weekly chart below shows the uptrend from the October lows 2020 lows has not resumed but from October 2022 has. There are always positive and negative swings in a longer-term trend. A look at the daily chart from the October 2022 lows validates that premise with plenty of volatility along the way. Short term the market has resumed the uptrend from the October 2023 lows. The current bounce remains in play despite any issues on the horizon. Time will tell how this plays out. Current activity shows optimism from the buy side and we will take what the market gives. We look to charts and fundamentals for answers. The key remains, know where you are now, know what is happening now, and know what is on the horizon… act accordingly. The goal is to manage the risk of positions, take what is offered… short or long, and then manage your money. Listen to the market not the talking heads.

Decide what you’re doing before the market opens based on your beliefs. Entry. Exit. Target. Define the risk of the position. Nothing more… Nothing less.

“Vision without action is a daydream… Action without vision is a nightmare.” Japanese proverb

The goal of these notes is to allow you, the investor, to learn how to see the market development as the progression through the sector develops based on news, speculation, and data. Data drives long-term results and develops trends… speculation and news are short-term drivers and offer higher-risk trading opportunities. Through the use of both technical and fundamental data, we can have greater confidence in our trading strategies with a disciplined approach to investing and managing the risk of our money.

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