Jim’s Notes Weekend Recap & Outlook

Moving the Market – March 15th

Markets were negative were negative again on Friday to end the week in negative territory. The open was lower and things never really improved throughout the day. The chatter was all about inflation and the FOMC meeting next week. The consensus is the Fed will leave rates unchanged following the CPI and PPI data this week.

The indexes were lower as investors continued to discuss inflation data and the outlook for the Fed. The activity shows rotation from the leaders based on shifting beliefs towards the Fed and interest rates. The volume was above average, the money flow ticked down, and the RSI was lower. Five sectors closed in positive territory as investors attempted to show a positive face with some rotation in play. The NASDAQ closed down 0.9%, DIA was down 0.8%, and the SP500 was down 0.6%. The major indexes closed lower on the day. The SOXX was down 0.7%. Small Caps (Russell 2000) were up 0.2%. The ten-year treasury yield was at 4.3% up 1 bps for the day. Crude Oil (USO) was up 0.04%. (UGA) was up 0.6%. Natural gas (UNG) was down 2.8%. The dollar was up 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: “We can’t solve problems by using the same kind of thinking we used when we created them.” — Albert Einstein.

Sector Rotation & The S&P 500 Index

The S&P 500 index closed down 33 points to 5117 moving the index down 0.65% with above-average volume. The index maintains the uptrend and is below the 10-day MA. Money flow was negative and RSI was lower. Some rotation on the day with XLE higher in its respective trend. Five of the eleven sectors closed higher on the day with REITs as the leader up 0.3%. The worst performer of the day was technology down 1.5%. The VIX index closed at 14.4 higher on the day. There is plenty to ponder between the headlines and the facts. SPEW was down 0.95%, showing the downside’s breadth versus the overall index.

Leaders:

XLK – Technology Entry $183. Stop $204.10. Broke above the $208 resistance and retreated. The sector was down 0.8% for the week. The semiconductors were the laggard keeping the sector down.

XLY – Consumer Discretionary The sector broke higher from a cup and handle pattern… it has retreated below the breakout point showing short-term weakness. The sector was down 1.2% for the week. Needs to hold the 50-day MA.

XLF – Financials Entry $33.65. Stop $39.92. Continued to trend higher with banks showing some positive moves. The sector was up 0.4% for the week. Moved above the resistance at $39.28 and followed through upside testing the 10-day MA. Interest rates ticked higher in inflation data and something to watch.

XLV – Healthcare has shifted to a sideways movement. Some testing on the week as we move back to the 30-day MA as the trendline. Entry $129. Stop $144.57. The sector was down 0.7% for the week.

XLP – Consumer Staples Uptrend remains in place moving above resistance at the $74.70 mark and testing. The sector was up 0.5% 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 down 0.2% for the week.

XLB – Basic Materials uptrend remains in play adjust your stops if you own any positions here. For the week was up 1.6%. Activity picks up as money rotates.

Laggards:

XLU – Utilities bounced off the $60.10 support level and cleared $62.90 resistance but tested it twice this week. Entry $61. Stop $62.70. The sector was down 0.4% for the week.

XLE – Energy making a steady climb higher after clearing resistance points. Entry ERX $52.15. Stop $58.65 (adjusted). Let it play out. The target of $64 was hit and now looking at $69.

IYZ – Telecom broke support at the $21.74 level and renewed the downtrend. The sector was down 1.3% for the week.

Losers:

IYR – REITs were weak all week as interest rates rose all week on the inflation data. The sector has been challenged by higher rates and vacancies in the commercial sector. We will see how this unfolds short term with $87 support. The sector was down 2.8% for the week.

Summary:

The SP500 index closed negative on above-average volume. RSI ticked down due to the rotation. Money flow ticked lower. Watching the leadership in the outliers and how this current test unfolds. The leaders remain in play but there was more breadth to the selling the last two days. We maintain our stops and continue to look for where money flow migrates. Technically the uptrend remains in play with the sellers and buyers battling it out. 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.)

Other Indexes To Watch

The NASDAQ index closed down 155 points to 15,973 as the index was down 0.96% for the day. The index has been challenged by increased volatility in the technology sector in the last few weeks and closed just below the 21-day EMA. SOXX was lower confirming the break below the $222.24 support Thursday. IGV was lower breaking below the 50-day MA. Mega caps look very similar as AAPL and GOOG were lower. Technically the index is testing the key levels of support and next week will be pivotal to the trendline. The focus is to follow the trend and manage the risk.

NASDAQ 100 (QQQ) was down 1.19% for the day as the mega-caps led the downside for the sector. The uptrend remains on the chart with some topping in play. Software led the downside on Friday. Groupon sold off 33% and Zillow was down 13% to lead the downside. . Entry $354.20. Stop $435 HIT STOP. Watching how the new week unfolds.

1) AAPL Watching if the bounce has any legs. Needs to clear $173.76 2) AMZN moved to the 20-day MA again. 3) GOOG bounced and tested. 4) MSFT broke higher and retreated. 5) META dumped to the 20-day MA. 6) NFLX below the 10-day MA. 7) TSLA (broke support Feb lows resumed downtrend) 8) QQQ broke below the 21-day EMA. Manage your stops if you hold positions and manage the risk going forward.

Small-Cap Index (IWM) downtrend reversal with a move above the December highs but can’t seem to get enough momentum. Needs to find conviction if going higher. Patience for now. The sector was down 2.1% for the week. The sector tried but failed yet again. Closed below the 21-day EMA as a negative.

Transports (IYT) rolling top on the chart as we see some profit taking. BDRY has responded well, bouncing back from the test at $8.95. The sector was down 2.2% for the week. Broke below the 30-day MA.

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 $14.84.

The Dollar (UUP) The dollar struggled on the week as interest rates fell and Powell talked about stimulus. Watching how it unfolds moving forward. The buck was down 0.9% for the week. Bounced higher on the inflation data.

Treasury Yield 10-Year Bond (TNX) The yield on the 10-year bond moved back to the February highs. The yield moved from 4.08% to 4.3% this week up 22bps. The move-up in yields triggered our stop in TLT and entry in TBT. Watching how this unfolds with the FOMC meeting next week.

Crude oil (USO) bottom reversal continues to move higher establishing an uptrend. The move above $75 was a positive with the confirmation on Friday. We adjusted our stop and letting it unfold. The commodity was up 4% for the week. Entry UCO $26.70. Stop $30.70. Patience.

Gold (GLD) The commodity broke higher from the consolidation pattern and went vertical. We added UGL and now we have a trailing stop to protect against a reversal. The pennant on the chart shows consolidation as we watch for a continuation of the uptrend. The metal was down 0.9% for the week. Entry $189.30. Stop – trailing 2%. UGL.

FINAL NOTES

For Monday: The broad indexes are showing some fatigue thanks to the CPI and PPI data putting pressure on interest rates and stocks. Adding to the angst is the FOMC meeting next week as the Fed pontificates how they will treat rates in light of the data. The is not expected to change rates but the comments from Powell carry plenty of weight for the markets. There is plenty of chatter and speculation on direction and leadership as seen over the last few weeks of trading. All the talk and juggling keeps the chatter about valuations and overbought in the news. The current activity shows rotation on the charts as money looks for where it will be treated the best. Money flow is shifting with rotation. Look to the outliers and take what is offered from each sector. SOXX, IGV, and XLK, all broke support. MGK held the 21-day EMA with others reaching decision points on distribution versus accumulation. USO broke higher. Set your stops and manage your risk accordingly.

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, have had back-to-back negative weeks on the index. Short term this is a caution signal but longer term we would need to break the 13-week MA. 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. The acceleration from the October 2023 low is getting extended. We have adjusted our stops on longer-term positions as we let this unfold. 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. There are many issues on the horizon with inflation remaining a top challenge for investors. Current activity shows volatility that is associated with extended moves. We look to charts and fundamentals for answers. Longer-term positions are a ‘hold’ with no accumulation towards the assets. 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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