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