Jim’s Notes Monday Recap & Outlook

Moving the Market – March 4th

The markets closed in negative territory thanks to some last-hour selling. Void of any news the markets floundered speculating about Mr. Powell’s testimony to Congress on Tuesday. Semiconductors and utilities led the upside along with some positive trading in REITs. The downside came from consumer discretionary and energy. The NASDAQ 100 closed lower as AAPL and GOOG both were down more than 2% on the day… it was good for our short trades but negative for the index. The move on Monday was more digesting the move to new highs from last week as we get a dump of economic data and plenty of talking from the Fed all week. Bitcoin continues to be the bright spot moving over $67,000. Energy and consumer discretionary led the downside and have my attention relative to the distribution. Natural gas jumped on anticipated demand from weather-related issues. There is plenty of news on tap this week to show how the economic picture is unfolding. Outside the Market page has more. We are still in a watch-and-see game for the major markets and leading sectors. The break higher Friday only added to the talk about the markets being overbought. It is easy to join the speculation train, but we need to focus on the charts relative to the data… eventually fundamentals are validated in the charts, but short-term activity is driven by FOMO and emotions of thought. Take what is offered and manage the risk.

The indexes mixed moving lower on the S& 500 and the NASDAQ. The activity was soft all day with some selling in the last hour of trading. Volume was slightly above average and money flow ticked lower. Seven sectors closed in positive territory with some rotation in leadership on the day. Consolidation patterns broke higher to end the week and today they digested and consolidated some of the moves. The NASDAQ closed down 0.41%, DIA was down 0.28%, and the SP500 was down 0.12%. The major indexes closed lower on the day. The SOXX was up 0.98%. Small Caps (Russell 2000) were down 0.1%. The ten-year treasury yield was at 4.21% up 3 bps for the day. Crude Oil (USO) was down 1.2%. (UGA) was down 1%. Natural gas (UNG) was 5.3%. The dollar was flat 0%. 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: “Progress is man’s ability to complicate simplicity.” — Thor Heyerdahl

Sector Rotation And The S&P 500 Index

The S&P 500 index closed down 6.1 points to 5131 moving the index down 0.12% with above-average volume. The index held the up trendline and remains positive. Money flow declined along with stocks. Seven of the eleven sectors closed higher on the day with utilities as the leader up 1.6%. The worst performer of the day was consumer discretionary down 1.3%. The VIX index closed at 13.5 higher on the day. There is plenty to ponder between the headlines and the facts. Watching how the new week unfolds relative to economic data and the Fed testimony. The last hour of trading shifted the sentiment slightly heading into Tuesday’s trading.

Leaders:

XLK – Technology Entry $183. Stop $203. Broke above the $208 resistance adding to the upside trend. The sector was up 2.6% for the week. The semiconductors were the leading component of the week with software trying to resume the uptrend. Biotech added some upside as well. Doji candle.

XLY – Consumer Discretionary The sector moved into a down trending channel on the chart and broke higher clearing the December highs. Positive uptrend from teh January lows. The sector was up 2% for the week. Retail (XRT) and construction retail are pushing the sector higher. Selling in play Monday.

XLF – Financials Entry $33.65. Stop $39.50. Continuing to trend higher with banks showing some positive moves. The sector was down 0.02% for the week. Moved above the resistance at $39.28 and followed through upside. Interest rates were lower at the end of the week and could be seen as a positive for the sector looking forward.

XLV – Healthcare remains in an uptrend from the October lows. Some testing on the week as we move back towards the trendline. Entry $129. Stop $143.50. The sector was down 1% for the week.

XLP – Consumer Staples Uptrend remains in place attempting to move above resistance at the $74.70 mark. The sector was down 0.4% for the week. Discount big box is the strength of the sector currently.

XLI – Industrials Uptrend remains in play moving higher in a steady uptrend. The sector was up 1% for the week. GE and LDOS adding leadership.

XLB – Basic Materials bottom reversal broke above the December highs and added to the upside. For the week was up 1.3%. Activity picking up in the materials VMC and EXP. Let it run.

Laggards:

XLU – Utilities Moved back to the $60.10 support level and bounced. Building a trading range as the bottoming pattern continues to set up on the chart. Watching how this unfolds as we need to clear $62.90. The sector was down 0.4% for the week. Solid upside move Monday.

XLE – Energy Cleared $85.52 resistance and moved higher on Friday as crude moved above the $80 level. Entry ERX $52.15. Stop $57.40 (adjusted). Let it play out. The chart broke the downtrend from the September highs, but it needs some momentum. Watching how crude plays out near term. Posturing to become a leading sector. Tested move higher.

IYZ – Telecom Held support at the $21.74 level and bounced to end the week. We closed our downside put trades with a solid gain and now watch how it unfolds from here. The sector was up 1.3% for the week.

Losers:

IYR – REITs found support at $86.97 and attempted a reversal of the downtrend with a move higher. The sector has been challenged by higher rates and vacancies in the commercial sector but is showing some signs of life thanks to residential. The sector was 2% for the week. The bottoming pattern broke higher on Friday. Entry $88.10. Added to upside and trend reversal.

Summary:

The SP500 index was lethargic all day as investors waited to see what Mr. Powell pontificates in his testimony to Congress on Tuesday. Likely more of the same. XLU made a move higher to the top of the trading range along with REITs. Money flow was lower. The index as well as the market is using the inflation data to fuel buying on hopes the Fed will ease sooner than later. Technically the uptrend remains in play and the buyers are present as we start a week full of economic data from February. Remember two things; first, the trend is your friend, and second, don’t fight the Fed… Both are currently in play.

(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 Indexes & Sectors To Watch

The NASDAQ index closed down 67 points to 16,207 as the index was down 0.41% for the day. Mega caps attempted to lead the day but sellers were present in the last hour of trading to close lower. The SOXX was higher on the day and IGV was slightly lower. As we manage the risk and watch the leadership, the uptrend remains in play. There is plenty of activity and speculation to filter through.

NASDAQ 100 (QQQ) was down 0.36% for the day as the mega-caps struggled not helping the sector. The uptrend remains on the chart with a modest test on the day. SOXX and IGV were mixed. Watching AAPL and GOOG as they moved lower. Manage stops and let it play out. Entry $354.20. Stop $435. Patience.

AAPL added to the move below the $180 support level again (May 180 puts @ $4.45) raising the stop, up 38% on Monday. AMZN hammer doji candle. GOOG ugly day for the stock(May $135 puts @ $5.40) Raised stop. up 38% on Monday. MSFT held above the 10-day EMA. META & NFLX held the 10-day MA. QQQ held above the 10-day EMA. Adjust your stops if you hold positions and manage the risk going forward.

Semiconductors (SOXX) Added position at $601. Stop $640. Tested lower… and bounced. Broke from the uptrending wedge to new highs. The sector was up 6.8% for the week. The uptrend from the November lows remains in play. Added to upside gaining 1%.

Software (IGV) tested lower to support at $410 level and held. Bounced on earnings and held the $420.25 level of support. The sector was up 2.6% for the week. Looking for opportunity on directional decision.

Biotech (IBB) consolidation pattern on the chart broke above the January highs and tested the move. Watching for some momentum in the sector. The sector was up 1.1% for the week. $136.50 level cleared on the upside. Inside day Friday… Another inside day?

Small-Cap Index (IWM) downtrend reversal with a move back toward the December highs but can’t seem to get enough momentum. Added at $192.13 upside move. Stop $192.13. Cleared $204.80 resistance… needs to find conviction. One big volatility mess on the chart… patience for now. The sector was up 3% for the week.

Transports (IYT) Broke higher from the sideways trading range and moved higher. Despite the Red Sea issues continuing to escalate the sector is moving higher. BDRY has responded well, bouncing back from the test at $8.95. The sector was up 0.2% for the week. Entry $266. Stop $272.

Red Sea issues continue to be bad. The activity continues to disrupt the passage of ships. The true impact of this on prices has yet to be passed through to consumers… this is a growing issue so look for disruption to the supply chains. BDRY entry $9.70. Stop $13.70.

The Dollar (UUP) The dollar bounced off the December lows and is now trading sideways as some believe lower rates are on the horizon. Watching how it unfolds moving forward. The buck was down 0.1% for the week.

Treasury Yield 10-Year Bond (TNX) The yield on the 10-year bond has been rising since the low in December, but it turned lower this week on the PCE Price Index offering hope relative to inflation and the Fed. The yield moved from 4.26% to 4.18% this week down 8 bps. Topping pattern on the yield chart shows some believe rates have peaked with the Fed softening on their stance… despite what the Fed is saying. TLT was up 0.6% for the week. Entry $93.52 (TMF is the leveraged trade). 4.21% Monday.

Crude oil (USO) bottom reversal last few weeks has moved to resistance at the $73.25 level and it finally cleared it on Friday. Production has been higher than expected as OPEC juggles its production outlook. Of interest to this conversation is the increased production in the US. OPEC has set a meeting for March to discuss extending their production cuts. As seen on the chart it is attempting to renew an uptrend from the December lows… plenty of volatility to go with it. The commodity was up 4.2% for the week. Entry UCO $26.70. Stop $29. Patience. Testing

Natural Gas (UNG) The commodity continues to struggle with an attempt to bounce off support at the $14.70 level. The trade set up on the bounce remains in place as we let it unfold. The commodity was up 7.9% for the week. Added position entry $16.55. Stop $16.10. Bear flag pattern on the chart. Bottom reversal confirmation.

Gold (GLD) The commodity traded sideways with some volatility sparked by a stronger dollar the last month. The metal did bounce at support $183.72 and attempted a trend reversal as inflation data adds to speculation of a lower dollar. The metal was up 2.2% for the week. Entry $189.30. UGL. Adding to upside on speculation.

FINAL NOTES

Monday: The broad indexes closed lower for the day. There is plenty of chatter and speculation on direction and leadership, but as seen on Thursday and Friday all you need is little optimism towards the inflation outlook and up the markets go. Tuesday Powell will either add to the optimism or stomp on it as he testifies to Congress on the state of the economy. Inflation will be the topic of choice. Seven of the eleven sectors closed higher with utilities taking the lead. SOXX added to the verticle upside move. VIX moved down to 13.5 as late-day selling bumped the needle higher. Economic data remains suspect at best, and the Fed continues to talk last of the year for rate cuts, despite what the talking heads are saying currently following the PCE Price Index. We start the week in negative territory with the economic data heavy this week. It is interesting to note the jump in crypto stocks of late as we adjust our stops on positions. Areas of focus for Tuesday… Powell testimony and the ISM Services data. AAPL & GOOG downside moves.

Longer-Term View: The uptrend from the October lows continues. The index moved above the July and August highs and broke above the 2021 highs to a new high. This resumes the long-term uptrend from the lows of October 2022. Currently, we are allowing the short-term to 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 2020 lows is still in play at a slower degree of assent. 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. 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.

Hot Topics

Jim's Notes latest update directly to your inbox!

Please enable JavaScript in your browser to complete this form.
Scroll to Top