Saturday September 5, 2015

$SPY, $STUDY The technical condition of the market was mixed last week leaving the Major Market Model, Short Term Traders Model and the Asset Allocation Recommendation unchanged.  The major averages were unable to build off of the previous week’s relief rally and the five-day span left every index back in the red for the year and back in correction territory.

Every sector was lower with the Utilities Sector (XLU), Healthcare Sector (XLV) and Financial Sector (XLF) all down more than 4%. Internal breadth deteriorated but didn’t approach the wreckage of last week.

Bearish sentiment increased and closed at levels associated with market bottoms indicating that the selling may soon be abating. The Percentage of Bullish Advisors fell to 27.8% last week ending just above the 26.4% level hit in March 2009. That coincided with the bottom of the bear market that had started the previous year. The Percentage of Bearish Advisors jumped to 26.8%, which was the highest level since the fall of 2011. Advisors’ looking for a market correction was above 40% for a fifth week showing the pros were shying away from buying dips. In addition, VIX remained elevated after peaking the previous week at 53.3. I noted last week that previous jumps above 40 in the VIX led to the market being down three to four months out. In particular, the fall of 2009, the spring of 2010 and the fall of 2011.

After Friday’s drop the targeted levels for DJIA, S&P 500 and NASDAQ will be the lows of 8/24/15. A successful retest of those lows could bring buyers in off the sidelines. The ‘Numbers to Watch’ below are levels that traders will keep an eye on to see if they hold. If those levels provide support it’s likely that the market will then trade in a volatile range ahead of the Federal Reserve’s September policy meeting. For now, expect downward pressure to remain over the near term with the occasional snap-back relief rally.

For the S&P 500, watch for support at 1920, followed by 1900. Resistance stands near 1967, followed by 1975.

Monday August 24, 2015

$SPY, $STUDY Today’s trade SPY150918P192, BTO #12 @1:26 PM @$5.29, STC @1:41 #12 @$5.85

One could write an epistle on the past three days and not cover the entire spectrum of emotional and psychological trauma that we have experienced.  Today is not an exception and I am for one glad to have gotten in and gotten out with a profit.  I exited today's trade on my profit target since once again I entered the trade above the resistance level. 

Saturday August 22, 2015

$SPY, $STUDY, Concerns over economic growth deepened Friday after China’s August manufacturing index showed a contraction and hit the lowest level since 2009 driving stocks into decline around the globe. We haven’t seen a correction since 2011 as almost all pullbacks were followed by V-shape bounces in the past several years. Now we’ve got a correction and it has scared many investors.

How much lower can stocks go? Technically, the DJIA now sits right above the bull market trend line drawn from the 2009 bottom. The S&P 500 is not there yet. The support for the S&P 500 is near 1900, its summer 2014 low, followed by the 1860-1870 area near its October 2104 low. The long term bull market trend line since the March 2009 bottom stands near 1800. There were signs of panic near the end of trading Friday with VIX surging to the highest level since October 2014 and greater than 90% volume to the downside. While there are growth concerns, we have to ask ourselves whether the U.S. economy is heading into recession. The answer is likely no. This week’s rout is likely just a bull market correction.

That being said the Alpha Market Model remains Bearish and the Asset Allocation recommendation has declined to 12.5% Long and 87.5% Cash.

Saturday August 15, 2015

$SPY, $STUDY After some wild moves from earlier in the week and an indecisive session Thursday, investors stayed away from the market on Friday. Trading was very slow as there was little news to set a direction. The good news was that after a flat morning, stocks were able to push modestly higher in the afternoon with financial and industrial stocks leading the way.

As of Friday’s close both the Alpha Major Market Model and the short term Traders Model are Bearish, the Asset Allocation Recommendation remains at 25% Long and 75% Cash. The underlying watch lists which we monitor remain 60% Bullish,but upon further review one must note that this position is clearly carried by the Bullishness of the Master List of stocks which was freshened at the end of July.  This is markedly a stock pickers market and you had better be a very good one at that.

Stocks were set up for some oversold bounce on Monday at the beginning of this past week. But that setup was jolted by the Chinese currency devaluation. Although there may be other unexpected events which could shock the market, with the Chinese currency moves behind us stocks should resume their upside probe in the coming weeks. There were many positive divergences between the price moves of the major indexes and their technical indicators as well as market internals when stocks dipped on this past Tuesday and Wednesday. These positive divergences tend to suggest that stocks have reached a short term bottom. With that said, the S&P 500’s chart has developed a triangle pattern since early July. A triangle pattern suggests more sideways moves until there is a breakout one way or the other. For now, the upper bound (resistance) of that triangle stands near 2095 and the lower bound (support) stands near 2076.

Wednesday August 12, 2115

$SPY, $STUDY Todays trade, SPY150918P206 BTO #25 @10:04 AM @$4.19 STC #25 @10:12 @$4.39.

Here again as I did yesterday I exited on my Profit target versus a technical indicator.  My entry was over the Resistance line which is a risky point to trade at most of the time, but this market appears to be heading down with conviction.

Saturday August 1, 2015

$SPY, $STUDY, Poor earnings, coupled with a dip in crude oil prices back to a multi-month low, took the steam out of stocks Friday. Energy stocks gave up their gains from the past three sessions while a drop in treasury yields sent bank stocks lower. A miniature gain (+0.2% vs. 0.6% expected) in Q2 Employment Cost Index had investors questioning whether there is enough justification for the Fed to raise rates in September. Saving the day were the biotech (on AMGN earnings) and small cap stocks. Russell 2000 closed higher but the three major indexes all finished lower.

In spite of the technical condition of the market improving slightly last week there was no change in the Alpha Major Market Model, the Traders Model or the Asset Allocations recommendation.

With earnings season slowing down and many investors heading out of town for vacation before school starts, expect trading to slow in the next several weeks. For next week, focus is likely to be on the July jobs report and the Fed. Investors are waiting to see whether July’s jobs data would meet the Fed’s criteria for “some further improvement in the labor market” for a rate hike. Technically, the longer term trend remains up but the S&P 500 isn’t likely to get out of its sideways pattern any time soon. Expect a lackluster market in the near term.

The end of July Alpha Master list up date has been completed with 158 names on the new list.  You can tell by comparing this week’s statics which are listed below that the new list offers more names worth watching.  Of note the new list is comprised of names from seven sectors led by the Technology sector with 44 names representing 27% followed closely by Healthcare with 40 names at 25%.  Encouragingly the combined Consumer sector represented 36% of list which may bode well for the overall economy.

Keep a watchful eye on the Dow Jones Transports which have been making lower highs and lower lows since topping out on 11/28/14 and the chart pattern suggests that the index has put in a double bottom and could trade higher. As has been mentioned previously it would be difficult for the broader market to move higher without participation from the transports. This week’s move above its 50-day moving average and a continued rise above 8500 would signal that the intermediate-term trend of the index is back to a bull confirmed trend and would be a positive for the overall market.

FactSet StreetAccount Summary - US Week Ahead: Aug 3-7

Saturday July 25, 215

$SPY, $STUDY Blowout earnings from AMZN set the stock market up for a nice bounce on Friday morning, however, with energy, materials and high-beta biotech stocks gapping down at the open, the overall upside momentum was short-lived. The Flash PMI out of China, which showed a contraction in manufacturing activities, had many investors worried. A sizable miss in June new home sales didn’t help. Stocks slid all the way into the close with all ten major sectors falling underwater. VIX jumped 8.7% to 13.74.

Unless you are in a few technology names Friday was just an overall ugly session. The number of new 52-week lows on both the NYSE and the NASDAQ surged to the highest level since last October. Although part of the market, such as large cap internet and bank stocks, is doing well, the deteriorating internals suggest that the market could be in for more rout.

The technical condition of the market was mixed last week as reflected in the Asset Allocation recommendation below, this indicator has declined to 25% Long – 75% Cash, down from the prior week. The Major Market Model also weakened over the week with 3 of the four major’s now carrying Bearish – Sell indicators.  Internal breadth numbers deteriorated as both the NYSE and NASDAQ Advance/Decline lines continued to make lower highs and lower lows and there was additional expansion in new 52-week lows. Both indexes put up triple-digit new 52-week lows each day of the week.

Every sector finished the week in the red with the exception of the Consumer Discretionary Sector (XLY) which finished marginally higher. The Materials Sector (XLB), Energy Sector (XLE) and Industrial Sector (XLI) were all hit hard. All three made a new 52-week low and the Energy Sector has been down 11 of the last 12 weeks. Capital preservation should be the priority in the very near term as we see how the current down leg plays out. With that said, the long term trend is still up.

FactSet StreetAccountSummary - US Weekly Recap: US Weekly Recap: Dow (2.86%), S&P (2.21%),Nasdaq (2.33%), Russell 2000 (3.24%)

Saturday July 18, 2015

$SPY, $STUDY After one week into the earnings season, the message from the stock market is that things weren’t bad. Large cap technology stocks stood out as the brightest spots which pushed the NASDAQ to yet another record today. A blowout report from GOOGL lifted the whole internet sector. On the negative side, a stronger dollar continued to take its toll on energy and material stocks, as well as consumer stocks with large international presence.

Better than expected earnings reports, coupled hopefully with a resolution to the Greek debt crisis, at least a temporarily resolution, has brought VIX (11.95) to the lowest level since last December.  Rebounding technical conditions allowed Investors to begin to return their focus to an improving economy and better than expected earnings reports. Most of the major averages had also traded back above their respective 50-day and 200-day moving average which is a plus. However, the DJ Utility Index, DJ Transportation Index and Philadelphia Semiconductor Index were still below those resistance levels. The NASDAQ made it into record territory but it was the only index that broke out to a new high.

A quick review of the Alpha Major Market Model below shows the week ended with most of the indexes consolidating gains from the last week and only the NASDAQ breaking out of its trading range. Over all it was a status que week for our models with no major changes to report. The NASDAQ breakout was due to huge moves in a handful of big name tech stocks and the record run at this stage is a non-confirmed new high. The market still faces some headwinds with Greece and China but this week’s action was encouraging for bullish investors. Earnings have been beating lowered expectations and if that continues it could trigger a summer rally by the broader market. Keep an eye on the internal breadth numbers for confirmation that any breakout to new highs has broad sponsorship. That would signal that this week’s rally is for real. Otherwise the market remains range bound. Things can change quickly during an earnings season, and it remains a stock picker’s market.

Saturday July 11, 2015

$SPY, $STUDY, What a difference a day made! Greece’s latest proposal looked good enough for another bailout while the Chinese stock market rallied for a second session. Although trading was slow Friday ahead of the weekend, bulls can take a sigh of relief as all major indexes held on to their morning gains throughout the session and finished near their intraday highs.

Although stocks are likely to continue to feel the ripple effect from Greece and China, attention will now begin to turn to earnings in the coming weeks as high profile firms, such as JPM, WFC, JNJ, and CSX, start to report on Tuesday. Technically, the longer term trend is up, and we continue to see positive divergences between the price levels of the major indexes and their technical indicators during the selloff earlier this week. Once the headline risks pass, odds should favor more bounces and lower volatility.

Over the past week the stock market continued to be held hostage by headlines coming from Greece and China. Volatility increased and one day’s collapse was met the next day with traders buying stocks across the board. In the end the different indexes were little changed. Unfortunately, that’s likely to continue as the problems in Greece and China aren’t about to be resolved quickly. Throw in a Federal Reserve that’s anxious to raise interest rates in September and you have a market that’s stuck in neutral.

Look for another volatile week and keep a watch on the past week’s lows. The market is likely to trade off of short-term headlines and if this week’s lows are broken selling could intensify. If it does, buyers should move in at 17150 for the DJIA, 2010 for the S&P 500 and 4850 for the NASDAQ. If investors get positive action from China’s market and a rally in Europe from a Greek debt resolution the market is still oversold and could work its way higher. The Alpha Intermediate Term Major Market model remains Bullish but the Short term Traders model is extremely negative.  We sold off AVGO and IDTI on Stop Loss violations and elected not to replace those positions in the face of the negative news out of China and Greece.  Should we see a bounce in the coming week we may add a few positions from the Watch List but here again with caution and tight Stop Limits.  The Asset Allocation recommendation remains at 37.5% Long and 63.5% Cash. 

As earnings season gets into full swing in the coming week and investors are going to struggle with the effects of a stronger U.S. dollar on international revenues and earnings. According to Factset, earnings for the S&P 500 are expected to decline year-over-year in the second quarter by -4.4% and that’s going to keep a lid on the market until companies raise their guidance for the third and fourth quarter.

FactSet StreetAccount Summary - US Weekly Recap: Dow+0.17%, S&P (0.01%), Nasdaq (0.23%), Russell 2000 +0.30%

What Factors Will S&P 500Companies Cite as Negative Impacts on Q2 Earnings and Sales?

Wednesday July 8, 2015

$SPY, $STUDY Todays trade SPY150821P207 Entry signal at 9:23 AM Trade Puts, entered @9:49 AM BTO #20 @$4.92, STC @10:03 #20 @$5.17.  I had bracketed this trade with Up 0.25 limit order and Down 0.15 Stop order.  

Monday July 6, 2015

$SPY, $STUDY Todays trade, SPY150821C205, BTO #19 @ 9:56 AM @$5.39, STC #19 @ 10:54 AM @$6.00. 

I am never too old or too experienced to learn a new trick.  Up until last week I have worked exclusively with alert and manual order entry.  As you may have noted in my June 27^th blog post I took a loss on the 26^th as the result of being unable to quickly execute at my limit price due to volume volatility fueled by the rebalancing of the Russell index. It was not a horrific loss but as one who does not like to lose it hurt my pride more than my wallet.

Last week saw me working with the Active Trader utility and learning to navigate within the order entry utility with tool ‘trigger with brackets’. 

This tool establishes both a Limit and a Stop order using a margin which I control over the executed price.  In my case today I started with .25 Up and .10 Down.  After entering today as the market continued to rise I moved the Limit order up and slide the stop order accordingly, thus permitting the trade to capture a larger share of the days rise without the need to reenter trades. 

It took a little faith on my part having had some bad experience two years ago as I tried to master the OCO technique, which was in fact a second step to the order entry, worked well with existing positions but not quickly enough for my day trading activities.  The Trigger with Brackets fits my style a little better and personally I feel more in control of the process.  Good luck and good trading.

Tuesday July 7, 2015

$SPY, $STUDY Todays trade SPY150821P208, Entry Signal at 6:59 AM Entered at 10:07 AM BTO #18 @$5.70, Exited at 10:34 STC #18 @$6.10.

Friday July 3, 2015

$SPY, $STUDY With the Greece referendum up for voting on Sunday, investors stayed cautious ahead of the long weekend. There were no fireworks in the stock market Thursday, as trading slowed noticeably from the prior few sessions. The June jobs report (nonfarm payrolls +223K with unemployment rate dropping to 5.3%) came in slightly below estimates, but it was strong enough to suggest a September rate hike. And like Wednesday, a gap-up open was followed by profit taking in the morning. The goo d news was that the three major indexes were able to hold yesterday’s lows. Stocks recouped most of the morning losses in the afternoon to finish near the breakeven line.

The Alpha Major Market model and the related Alpha One and Alpha Two models have been updated through July 2, 2015.  We will be updating the Alpha Master List during the month of July and posting it to the site on Saturday July 25^th.  The Asset Allocation recommendation remained at 37.5% Long and 62.5% Cash which is confirmed by the weakening in the aggregate ratings of our watch list universe which is at 39.72% Long – 16.82% Neutral – 43.46% Avoid. There are nine names on the watch list for those who like to play with a falling knife.  Should I wake up one day in the coming week with an eye for expansion HAIN and LEN would be two I might focus on and both GILD and IDTI are continuing to show signs of weakening and may be removed from the portfolio in the coming week should a reversal not occur.

Expect fireworks in the stock market early next week, as the market expects actions from Greece’s creditors after the vote on the referendum. Technically, stocks aren’t in a bad shape. Both the DJIA and the S&P 500 were able to hold their respective 200-day moving averages (17687 for the DJIA and 2056 for the S&P 500) while the NASDAQ held its 100-day moving average (4095). Should these support levels get broken, areas near this week’s lows (10576 for the DJIA and 2056 for the S&P 500) should hold in the near term.

FactSetStreetAccount Summary - US Weekly Recap: Dow (1.21%), S&P (1.18%), Nasdaq(1.40%), Russell 2000 (2.46%)

Saturday June 27, 2015

$SPY, $STUDY With the Greeks set to meet with their creditors over the weekend, investors stayed cautious Friday.  A nearly 8% drop in the Shanghai stock market scared some investors, while a strong earnings report from NKE and a better than expected June Michigan Sentiment reading kept investors optimistic about our economic growth. Like Thursday, higher prices in the first hour were met by profit taking. Technology stocks weighed on the overall market after MU missed its earnings on poor PC sales.

Trading volume was unduly heavy Friday as the result of the Russell index rebalancing. There are a few factors which will likely keep the uncertainty relatively high in the market next week. The obvious one continues to be the Greek factor. Greece is due to make a payment to the IMF on Tuesday. Unless a deal is reached over the weekend, expect the anxiety to continue into Tuesday. Then, there is the usual quarter end window dressing which should bring a positive bias. Lastly, it is going to be a holiday-shortened week. Neither bulls nor bears are likely to make large trading commitments ahead of the holiday.

Technically, there are some increasing warning signs as the Major Market Model has reduced the Asset Allocation recommendation to 37.5% Long 62.5% Cash. I added AVGO, EW and GILD to the portfolio on June 22^nd and sold STZ on June 25^th due to an Opinion Downgrade.  Timing is everything and my timing over the past week left something to be desired.  Not only did I elect to add to the portfolio in front of the current weakening in Technology segment I barely broke even for the week with my options trading.  While there were two winning and two losing trades resulting in a nominal profit for the week I chose to trade on Friday not taking into account the probable impact of the Russell rebalancing activities.  Friday’s trade resulted in a -6.89% loss on the trade and while not the largest single loss for the year it is close.  And I have no one but myself to blame, as I neglected to take my own advice and take the time to check the calendar before trading.  This negligence resulted in my being locked into a positon after my Stop Loss alert was triggered and having to watch the Bid drop an additional dime before I could get executed.  My fault and a lesson learned. 

However the overall uptrend remains intact as the S&P 500 remains in a slight upward sloping/sideways channel, stock-picking is the way to go.

FactSet StreetAccount Summary - US Weekly Recap: Dow(0.38%), S&P (0.40%), Nasdaq (0.71%), Russell 2000 (0.38%)

Monday June 22, 2015

$SPY, $STUDY Todays trade SPY150821C212 entered @10:34 AM BTO #24 @$4.25, exited @11:23 AM STC #24 @$4.50.  Bracketed at $4.56 Up and $4.15 down.  Closed the trade @$4.50 as I have to leave the desk for a while and would not be able to monitor the position.  

Saturday June 20, 2015

$SPY, $STUDY, The markets were lower Friday after the record run by the NASDAQ and Russell 2000 on Thursday.  It was a broad based selloff as every sector was lower but small caps continued to outperform as the Russell 2000 finished flat. While next week has a negative bias a bailout for Greece could spark a relief rally. Expect headlines out of Europe to set the stage for Monday.

FactSetStreetAccount Summary - US Weekly Recap: Dow +0.64%, S&P +0.75%, Nasdaq+1.30%, Russell 2000 +1.55%

Thursday June 18, 2015

$SPY, $STUDY, Todays trade SPY150717C210 entered @10:04 AM BTO #28 @$3.56, exited @ 10:52 AM STC #28 @$3.81.  Bracketed Up $3.81 Down $3.46. This trade was originated with a carryover entry signal which I am wary of hence I established my limits on the conservative side today.

Tuesday June 16, 2015

$SPY, $STUDY, Todays Trade SPY150717C209 Entered @ 10:24 AM BTO #28 @$3.55 Avg. Price, Exited @ 11:15 STC #28 @$3.84 again Avg. Price. The trading volume is on the thin side and while I had a strong set up  and entry signal this was not a trade for the light hearted.  

Monday June 15, 2015

$SPY, $STUDY No Trade today, the market opened down very hard for the first twenty minutes or so than began to reverse and trade laterally.  I try not to trade into an indecisive market and that is what we have today.  With the FOMC meeting starting tomorrow we will most likely see more of this type of chart for the next few days.  Good time to go fishing or play golf if it is not too hot.

Saturday June 13, 2015

$SPY, $STUDY, Greece stole the headlines again this past week after the breakdown with the European Central Bank over debt repayment plans. Friday was a disappointing finish to a mostly positive week as investors stayed on the sidelines ahead of the next FOMC meeting. Improving economic data continues to campaign for a sooner than later hike in interest rates but its unlikely the Federal Reserve will do anything before September. Fed Chairperson Janet Yellen will have traders hanging on every word from the FOMC meeting minutes on Wednesday looking for hints on the rate hike timeline. Expect another volatile week as markets will also continue to trade off European headlines and the Greece debt debacle. This is beginning to sound like a broken record.

Not much has changed from the perspective of the Major Market Mode, neither the Asset Allocation Recommendation nor the overall analysis of the six watch lists which we track.  Middle of the road, not adding to the portfolio at this time and will remain cautious going into the week.  In general the trading volume was weak over the past week which will cause the news driven volatility to appear stronger than in reality it will be, trade slowly and cautiously in front of the FOMC release on Wednesday.

FactSet StreetAccount Summary - USWeekly Recap: Dow +0.28%, S&P +0.06%, Nasdaq (0.34%), Russell 2000 +0.32%