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%)