Jim’s Notes Thursday Recap

Moving the Market – February 15th

The markets added to the upside move on Thursday extending the next leg higher. The economic data was on the weak side but the intraday technical data showed a positive move in nine of the eleven sectors. The market appears to be in full-speed-ahead mode not fearing weaker data or inflation. After testing down to the 20-day EMA on Tuesday it has gone back to business as usual. This is bothering some as investors consider the market ‘overpriced’. Goldman Sach warned again on Thursday that about the market, “a breather is warranted, and likely.” Thus, the challenge we all face is wanting to predict what is going to happen. While the solution is to place your stops at the level of risk you are willing to accept currently based on the market activity and let the trends unfold. It isn’t about picking the top or bottom it is about the trend. Friday is options expiration but it should cause much in terms of volatility. Small caps were back above the $198.64 resistance and were the leader for the second day. SPY, QQQ, DIA, and MDY all tested to the 20-day EMA and bounced. MGK was up 0.1% versus RSP was up 1.2% a shift away from large caps on the day. Energy posted a solid break above resistance as crude moved higher. REITs, utilities, and financials all posted positive ticks on their respective charts. As always, we are taking what is offered, managing the risk, and following the trends until they break.

The indexes continued the bounce from Wednesday as the buyers remained engaged. The jobless claims were lower, but the regional PMIs continue to show weakness. and retail sales were weaker than expected… despite that the buyers were engaged in pushing stocks higher. We will see more inflation data on Friday with the PPI release. Watching the volatility factor as it has declined over the last two days. The NASDAQ closed up 0.3%, DIA was up 1%, and the SP500 was up 0.5%. The major indexes were higher on the day. The SOXX was down 0.1%. Small Caps (Russell 2000) were up 2.6%. The ten-year treasury yield was 4.24% down 2 bps for the day. Crude (USO) was up 1.8%. (UGA) was up 0.1%. Natural gas (UNG) was down 0.5%. The dollar was down 0.4%. 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: “Trading is very competitive and you have to handle getting your butt kicked.” — Paul Tudor Jones.

Sector Rotation And The S&P 500 Index

The S&P 500 index closed up 29 points to 5029 moving the index up 0.58% with below-average volume. The index moved back above the 5000 level. Money flow pointing to the index being overbought short term. Nine of the eleven sectors closed higher on the day with energy as the leader up 2.7%. The worst performer of the day was technology down 0.2%. The VIX index closed at 14.0 lower on the day. Plenty to ponder between the headlines and the facts. Held the 20-day EMA and bounce. Watching how the inflation data and speculation end the week.

Leaders:

XLK – Technology Entry $193. Stop $202. Bounce-off support at $183.50 and renewed the uptrend. Tested and bounced… Letting it play out and managing the risk. The sector was up 2.7% for the week. SOXX, IGV leading. Held test at support.

XLY – Consumer Discretionary Tested support $171.50. Moved into a downtrend channel on the chart and moved higher during the week. Needs to move above the December high. The sector was up 1.4% for the week. Held support and bounced.

XLF – Financials Entry $33.65. Stop $37.80. Traded slightly higher into a consolidation pattern. The sector was up 0.2% for the week. Holding move above the resistance at $37.95. NYCB regional bank worries is worthy of our attention moving forward. NYCB and KRE bounced nicely on Friday. Broke higher from the trading range.

XLV – Healthcare remains in an uptrend from the October lows. Solid upside for the week confirming the move above the previous high. Entry $129. Stop $141. The sector was up 1.4% for the week. Broke higher.

XLP – Consumer Staples Uptrend remains in place for the defensive sector with a move towards resistance at $74.72 being tested. No Positions. The sector was down 1.4% for the week. The uptrend remains in play. Tested lower and bounced.

XLI – Industrials Topping pattern broke above resistance. Held $110.75 level of support and cleared $114.20 resistance. No Positions. The sector was up 1.1% for the week. The uptrend remains in play. Broke higher.

Laggards:

XLU – Utilities Moved back to the $60.10 support level. In a downtrend from the December highs. Watching how this unfolds. The sector was down 2% for the week. Held support and bounced.

XLE – Energy shows a bottoming pattern and attempted to clear $84.33 resistance but failed on Friday. Some volatility as crude oil looks for direction. Entry ERX $52.15. Stop $54.20 (adjusted). Let it play out. The chart remains in a downtrend from the September highs. Broke higher from the trading range.

IYZ – Telecom Topping pattern continued and broke below support at $22.93 offering a downside opportunity. Small bounce to end the week and watching how this unfolds. The sector was down 3.4% for the week. Solid gain on short trade Wednesday & Thursday adjusted stop. Resumed the downtrend… support?

XLB – Basic Materials bottom reversal in play with key support at $81. The downtrend in play from the December highs was up 0.06% for the week. Letting the consolidation unfold near term. Activity picking up in the materials CF and EXP. Broke higher from the consolidation pattern.

Losers:

IYR – REITs Moved to the next level of support at $87. The sector has been drifting lower on higher interest rates of late. The sector was up 0.05% for the week. Watching Interest rates near term. Watching NYCB as they cut their dividend due to commercial loans underwater… Remains in a short-term downtrend from the December highs. Broke the down trendline looking for follow-through. Trend reversal?

Summary:

The index followed through on the bounce at support… the small caps took the leadership role with several sectors breaking higher from consolidation patterns. Money flow remains in overbought territory. XLE, XLF, XLB, IYR, and XLU posted a solid move higher. Technology lagged on the day closing in negative territory. Technically the uptrend remains in play and the buyers remain engaged. 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 Indexes & Sectors To Watch

The NASDAQ index closed up 47 points to 15,906 as the index was up 0.3% for the day. Some weakness in both semiconductors and software held the index lower on the day. Small caps and transports helped the upside efforts. The uptrend remains in play and managing the risk that is and watching leadership.

NASDAQ 100 (QQQ) was up 0.3% for the day as the mega-caps tested support and bounced. The uptrend remains in play. Manage stops and let it play out. Entry $354.20. Stop $425. Patience.

Semiconductors (SOXX) Added position at $601. Stop $601. Tested lower… bounced at support. Took the opportunity presented. The sector was up 5.5% for the week. The uptrend from the November lows remains in play. Back to the upside leadership… Back near the previous highs.

Software (IGV) continued the uptrend from the January test. Broke higher from the topping on the chart. The sector was up 2.9% for the week. Adjusted stop on the move higher. Tested support and bounced.

Biotech (IBB) Topping pattern on the chart and a modest downtrend from the January highs. The sector was down 0.01% for the week. $136.50 level to clear on the upside. Bounced and watching for direction.

Small-Cap Index (IWM) down trending move breaks higher and looking for confirmation of the move. Added at $192.13 upside move. Stop $192.13. Cleared $198.64 bar. The flag pattern on the chart breaks to the upside. Letting it unfold with a breakeven stop. Back near the December highs… letting it unfold.

Transports (IYT) Broke higher from the sideways trading range and confirmed the move higher. Despite the Red Sea issues continuing to escalate the sector is moving higher. BDRY has done well in response, bouncing back from the test at $8.95. The sector was up 3.1% for the week. Entry $266. Stop $263. Added to the break higher.

Red Sea issues are continuing to be bad. There are been ships on fire, protection vehicles turned back, and just an overall mess. The cost in some cases is over $100k per day. 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 $11.40

The Dollar (UUP) The dollar bounced off the December lows and has not looked back. Stronger dollar in January. Fed talks on higher interest rates are keeping the dollar higher. The buck was up 0.2% for the week. Retracing the gap higher from the inflation data.

Treasury Yield 10-Year Bond (TNX) The yield on the 10-year bond jumped following the FOMC meeting. The yield moved from 4.03% to 4.19% this week up 16 bps. Higher rates are not good for bond prices or banks at this juncture. TLT was down 2.3% for the week. TMV has been the trade of late. Closed at 4.24% – Still elevated.

Crude oil (USO) Remains a challenge relative to clarity. 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 6.1% for the week after being down 7.3% last week. Entry UCO $26.70. Stop $28. Higher to start the week. Resistance at $73.26… tested lower on build in supply again this week. Bounced back on Thursday.

Natural Gas (UNG) The move higher from the December lows came to an abrupt end with natural gas falling on projected supply rising the first half of the year. We traded the upside move and the downside move. Pressure is on the downside based on the White House taking away permits for new LNG facilities for transport globally. Not seeing any reversal to the downtrend currently. Managing our stops on KOLD. The commodity was down 11.4% for the week. Accelerated lower again. $14.72 next level to hold.

Gold (GLD) The commodity continues to trade sideways with some volatility sparked by a stronger dollar the last month. The dollar gained some near-term strength adding downside pressure on the metal. The metal was down 0.5% for the week. Broke support on the rising dollar… GLL in play. Watching $183.72 support. Bounced on Thursday with a weaker dollar.

FINAL NOTES

Thursday: The broad index held the longer-term uptrend and added to the upside. Plenty of chatter and speculation on direction and leadership. Nine of the eleven sectors closed higher with some breaking from consolidation patterns. VIX dropped back to 14.0still elevated but some calm was restored in trading. Plenty of distractions in the activity, but we remained focused on what is moving and whether the buyers remained in control.

Longer-Term View: The uptrend from the October lows continues. They 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