Dow Average Closes out a super choppy week at all-time high of 16,583.34. Interest Rates and US dollarfirm. No significant phase changes in the 4 indices leaving a lot of weary traders to boot!
I have waited a long time for the second tier bottom in both the rates and the dollar to happen simultaneously-a long time! Now, it seems that the wait is over. Both gave beautiful technical signals, with the TLT’s leaving ablow off top for 2014 last week and the UUP leaving an island bottom-a gap to new lows followed by a gap higher. Then off she went!
The Dow looks amazing, but the S&P 500 best I can say, looks promising. NASDAQ has work to do for sure before anyone will regain major confidence and the Russell 2000s had a possible 3rd reversal candle after making new 60 plus day lows, yet remains beneath the 200 DMA.
Concerning the earnings season, of the 450 S&P 500 (SPX) constituents that have released results this earnings season, 76 percent have beaten estimates for profit, while 53 percent have exceeded projections for revenue, data compiled by Bloomberg show. The index’s members increased their earnings by 4.6 percent and their sales by 2.8 percent in the first quarter, according to analysts surveyed by Bloomberg.
So, if we add up the factors of a bottoming dollar, higher rates (assuming they rise incrementally) and a solid earnings season; then layer on that, the varied phases in the indices with the Dow closing on new highs-what does that formula say? Furthermore, add historical low volatility-in other words, complacency at a record high.
Markets are not stable at all-time closing highs. Assumption-something big is coming. No sell in May, go away kind of event either. In fact, last week even going to lunch led to some missed opportunities.
One thing is for certain, the old paradigms are shifting, the technicals tell you way more than anyfundamental analysis, especially since logic is shifting and, keep risk to a minimum at this point until the impact of the very real possibility that rates will rise and the dollar will continue going up has in store for us at this time of historical complacency with the Dow closing at new highs and NASDAQ quite possibly on the verge of a collapse!
Will the Dow and the S&P 500 stem the decline or will NASDAQ drag down the mighty? Stay tuned my friends.
S&P 500 (SPY) Another defense of the 50 DMA at 186.63 with 188.45 area to clear Subscribers: Negative Pivots in all but DIA
Russell 2000 (IWM) Yet another new low for 2104 followed by a strong close yet with basically average daily volume. 110.75 the 200 DMA
Dow (DIA) Inside day here right at the highs-166.06 is the number to clear
Nasdaq (QQQ) Higher lows on this correction since April but also lower highs. In other words, compression in a range that will at some point break.
XLF (Financials) The 50 DMA is at 22.01
SMH (Semiconductors) Fascinating chart-inside day under the 50 DMA and above the fast moving average-for my money-will watch which way this one breaks
IYT (Transportation) Has some overhead, but remains in good shape still. This could benefit from a stronger US dollar
IBB (Biotechnology) Like Humpty Dumpty, sitting on the wall of the 200 DMA-really needs to hold
XRT (Retail) Retail is where diversity will continue-some will prosper in a rising rate, dollar environment-especially those that import foreign goods. Others will falter if the market does. Inside day just under the 200 DMA
IYR (Real Estate) At resistance but could power through
ITB (US Home Construction) Decided to switch to this ETF which is sitting on the 200 DMA and worth watching for next moves
GLD 123 support now to hold or fail
USO (US Oil Fund) Unconfirmed phase change to warning with 35.98 the real test of its resolve
OIH (Oil Services) topping action or at least, time for a correction
XLE (Energy) topping action
XOP (Oil and Gas Exploration) The 50 DMA is at 72.84
TBT (Ultrashort Lehman 20+ Year Treasuries) TLTs broke under the fast moving average in its journey towards showing the blow off top for 2014
UUP (Dollar Bull) Subscribers: If FXE gaps lower and does not fill the gap-we will buy US Dollar through this ETF
EEM (Emerging Markets) Looking out, the emerging markets might have had their move up
IFN (India Fund Inc.) Subscribers: Really too bad we got blipped out-but watching over next couple of days to see if this pop holds
EWP (Spain) Subscribers: Gapped lower but if this level holds, long tern charts here look good
FXI (China Large Cap Fund) A rising US dollar may not be great for China-chart at support level 34.25
TAN (Guggenheim Solar Energy) Inside day on the 200 DMA
CORN (Corn) Subscribers: Our favorite trade is done for now-bumper crop reported. Around 33.20 is where I would like to possibly re enter
Longs: On categories: Gap higher days we go to all categories and choose ones with lowest risk that break the opening range. On weaker days, we look at Category 3, especially if the picks hold S1, previous day lows or a major moving average and have a good risk on the reversal. The difference between Category 1 and 2 is the stock condition-a Condition 1 is strongest stock and more likely to make a parabolic move.
Note: Anything that is on this list is a candidate for a swing trade-(of course market condition is a factor) -use the max risk mentioned along with an opening range stop using fudge factor and time confirms. I suggest you decide on 1 or 2 that have a risk you like and then position size accordingly
Letter to Subscribers:
As one who rarely runs for cover, I felt in this unique environment, it was the best way for me to reassess and lead going forward. I analyzed the portfolio for 2014 thus far. Based on 100k portfolio size, we began the year at 138k, peaked at 146K and ended this week (minus the small open positions) at 144.5k. So, overall, we are up for the year by almost 7% in an incredibly difficult environment. The best traders in the world when in this type of environment-confusing and one that runs counter to logic, will often go to cash to clear their minds and reset. The difference for us, is that I am known for catching the beginning of a rate of change, hence our long position in TBTs and will look to add and trade around that position as it matures.
Lot of picks for this week-these will be our initial focus and do not expect everything to set up all at once.
Category 1: (Aloha) N/A
Category 2: (Pipeline) N/A
Category 3: (Double Up) Positive Phase, Condition 1 through 4, Positive Pivots which means can either buy a opening range breakout or candidate for Opening Range Reversal, with Risk S1 or previous day low, whichever is lower unless noted differently, Target- Day to at least 3 ATRs from entry: (Opening range reversals are good on anything above S1)
BA Has to clear 132.38 and hold 129.75 and then has no resistance until it fills a gap 135.65
MPW ORR only with risk to around 13.40
TTM Inside day max risk 38.00 with a move over 39 projecting to new highs-minsiwing trade.
ADP If 77.40 holds, like this as well but also needs to clear 78.35-
AON Like over 86.82 with max risk 84.00 for swing
YUM Holding up well if remains above 75.00. like over R1 76.62
HST inside day with good risk to 21.32 the 10 DMA and over 21.71 clears recent highs
WMT Recovered well from the correction and improved in condition. 78.23 tight risk with 80.00 recent highs
GILD Over 80.28 looks good with risk to 77.40 level
Category 4: (Rip Tide) N/A
TRIP Inside day over the 200 DMA-has to clear 86.00 hold 83.25
A Inside day just under the 50 DMA-56.00 has to clear 54.60 hold
THC If holds 43.00 like over 44.75 to possible move to 48.75
AFL One more push over the 200 DMA at 63.40 and could see move to 70.00 area
JBLU 8.55 clears the 50 DMA and have to use a wide stop to 8.05
ANF At the 200 DMA after a golden cross. 36.00 support with a move over 38.20 clearing a lot of chart points including the 50 DMA
GOOG Either the low is in place which will be helpful to the overall market-in which case has to clear 519.10 or this was rally to resistance
GMCR if holds 103.25 now in a confirmed bull phase with target as high as 127
ONVO If holds 5.95 and clears 6.36 slingshot low and possible move up 7.75
AMPE over 7.30 clears the 200 DMA and will have to hold there to stay in
Shorts:
Category 5: Titanic-Bear Phase, Negative pivots, not oversold, Risk R1 or previous day high. Target: Day to swing
ARMH A bit oversold but could get more so. Has some support at 41.77 with resistance at Friday’s high
SCTY If cannot clear Friday high looks vulnerable down to 42.50
EXPE Inside day with move under Friday’s low reason to think 62.60 the 200 DMA is next
Category 6: White Cap-Having a 2-3 Day correction over the pivots.. In a Negative Phase, Positive Pivots. Can sell an Opening Range High Failure if happens below R1 or previous day high whatever is higher and/or weakness if breaks S1 and prior day’s lows
LNKD Inside day under the 10 DMA. If breaks S1 risk Friday’s high. Next support at 128
Bye For Now!
