Jim’s Notes Weekend Recap & Outlook

Moving the Market – March 2nd

The markets closed at new highs to end the week and the month of February. The ‘easing’ concerns about inflation gave investors hope the Fed would start to ease interest rates. Semiconductors led the upside move gaining more than 4%. The move pushed SOXX to new highs and a break from the rising wedge of consolidation. In turn, the NASDAQ 100 gained 1.5% and also broke to new highs. As we discussed earlier this week the markets can continue higher regardless of how analysts and talking heads view the valuation and Friday was a great example of trusting what you see on the charts versus what hear and read from others. The economic data for the week left the outlook unclear, despite the optimism around the PCE price index slipping to 2.8% there are still concerns about inflation. In fact, one stat that stood out was the six-month annualized inflation showing an increase of 2.5% versus 1.9% in December. In other words, we are seeing prices rising faster in the last two months. Bitcoin continues to be the bright spot moving over $60,000. Pharma stocks bounced back with IHE up 1.3% following some selling the past few days. DELL jumped 31% on strong demand for servers driven by AI demand. Crude was above $80 to close the week the commodity continues to show upside pressure. There is plenty of news on tap next 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 on Friday only adds to the talk about the markets being overbought as analysts point to insider selling, the percentage of shorts is up, retail sales are higher, indexes are at new highs, etc. The problem is that we have an administration that is willing to spend $2.50 for $1 of GDP. We have a Fed that is putting liquidity quietly into the system through banks, it is an election year, and as long as inflation is in a favorable range, and economics are tolerable, the markets can continue higher despite what anyone thinks… the point is you can make statistics point to your opinion, but it is a market of stocks and the charts will tell you very clearly the trend along with the winners and losers. That was seen on Thursday and Friday with just a little bit of favorable data. Don’t sway your thinking by distorting the data to say what you believe… follow the trends.

The indexes pushed to new higher on the S& 500 and the NASDAQ. It was a low to high day without much in terms of volatility. Volume was slightly above average and money flow ticked higher. Nine sectors closed in positive territory with solid leadership on the day. Consolidation patterns broke higher on some of the key charts and we will see how that unfolds next week. The NASDAQ closed up 1.1%, DIA was up 0.3%, and the SP500 was up 0.8%. The major indexes closed higher on the day. The SOXX was up 4.2%. Small Caps (Russell 2000) were 1%. The ten-year treasury yield was at 4.18% down 7 bps for the day. Crude Oil (USO) was up 2.1%. (UGA) was up 1.5%. Natural gas (UNG) was down 0.7%. The dollar was down 0.2%. 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 up 40 points to 5137 moving the index up 0.8% with above-average volume. The index held the up trendline and broke from the week-long consolidation. Money flow bounced along with stocks. Nine of the eleven sectors closed higher on the day with technology as the leader up 1.8% and semiconductors leading the sector. The worst performer of the day was utilities down 0.6%. The VIX index closed at 13.1 lower on the day. There is plenty to ponder between the headlines and the facts. Watching how the new week unfolds relative to economic data for February. Large caps offered solid upside on the day.

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.

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.

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.

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.

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 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.

Summary:

The SP500 index was lethargic to start the week but closed with a solid upside the last two days as inflation fears eased on the PCE data. The leaders are holding the trendline and XLK and XLE made a solid move higher on Friday. Money flow bounced with below-average volume. 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 up 183 points to 16,274 as the index was up 1.14% for the day. Mega caps led the day with technology stocks higher. The SOXX posted a solid bump higher along with software. 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 up 1.51% for the day as the mega-caps lead the sector. The uptrend remains on the chart breaking to new highs. SOXX and IGV were higher on the day as we a break from consolidation higher. Watching AAPL and GOOG as the laggards here. SOXX resumes the leadership role with two solid days of upside. Manage stops and let it play out. Entry $354.20. Stop $435. Patience.

AAPL tested and closed below the $180 support level again. AMZN tested the 20-day EMA and bounced. GOOGL broke the 50-day MA and fell 4.4% on AI issues… down 1.9% offering downside trade (May $135 puts @ $5.40). MSFT tested the 20-day EMA and bounced. META & NFLX held the 10-day MA and bounced. QQQ held the 20-day EMA and bounced. 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.

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 testing 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…

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).

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.

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.

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.

FINAL NOTES

Friday: The broad indexes closed higher 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. Nine of the eleven sectors closed higher with technology stocks returning to the leadership role. VIX moved down to 13.1 and anxiety levels subsided with the upside move. The key first levels of support were held and bounced to new highs. 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 ended the week positive as well with the S&)P 500 index gaining 0.9%, the NASDAQ up 1.7%, and semiconductors up 6.8%. It is interesting to note the jump in crypto stocks of late as we adjust our stops on positions. Areas of focus for Monday… response to the February economic reports.

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