December 11, 2013 2:15 pm ET: Intraday support/resistance:
VIX 14/15.2 (rising VIX is bearish)
Trin range: 0.0 - 1.3 (rising Trin is bearish)
Average VWAPs: +32/-100 (bearish) Market Notes (2:50pm ET):
The major averages continue yesterday's selloff as the VIX jumps. Apart from the Dow Industrials (DJIA), the intraday levels are showing that there's more room left to the downside especially in the Nasdaq and the small-cap Russell 2000 (RUT). As of this writing, the Dow Transport Index (DTX) is testing support at 708.5. Its chart is showing a completion of a one month head and shoulders top. Should the price break under the shoulderline at 708.5, further downside is indicated. Judging from the height of the head (at 730), the DTX could drop to 685. A break under that level would show an island reversal which is another bearish chart pattern. But, that's still a ways away (one would hope) and there's still the Santa rally to contend with. December 10, 2013 1:30 pm ET: Intraday support/resistance:
VIX 13.7/14.4 (rising VIX is bearish)
Trin range: 0.65 - 0.9 (Trin is in bullish territory but it is rising which is short-term bearish)
Average VWAPs: +47/-80 (moderately bearish but high positive VWAPs indicate sector rotation) Market Notes (2:00pm ET):
It didn't take long for the major averages to hit their intraday lows. The question now is will they hold until the end of the session? Market internals are still leaning towards the bearish side so far so we could see further downside from here but I wouldn't bet the farm on it. December 9, 2013 2:00 pm ET: Intraday support/resistance:
VIX 13.8/14.1 (rising VIX is bearish)
Trin range: 0.5 - 0.75 (bullish to bullish contrarian)
Average VWAPs: +48/-74 (bears stepping in at the moment) Market Notes (2:10pm ET):
The intraday levels for the SPX, DTX, and DJIA are showing that their intraday support and resistance levels have already been reached. Not so for the Nazzie and the Russell which are showing support levels lower than their current intraday lows. Market internals are becoming increasingly bearish indicating that further downside is likely, especially since the Trin neared the 0.5 contrarian level earlier in the session. It appears that the bulls are taking a long lunch today. December 6, 2013 2:20 pm ET: Intraday support/resistance:
VIX 13.6/14.1 (falling VIX is bullish)
Trin range: 0.9 - 1.2 (neutral)
Average VWAPs: +74/-64 (bull/bear battle) Market Notes (4pm ET):
Today's rise in consumer sentiment and employment figures should have sent the market down but instead it rocketed up. What does this mean? There are plenty of conflicting views ranging from 1. Fed (bond) tapering is already priced into the market to 2. Fed tapering will not affect the market as much as previously thought. Whatever the reason, one fact is incontrovertible: investor complacency is growing.
According to a survey by Investor Intelligence, the ratio of investor bullishness to bearishness is at 80%. Anything above 75% indicates a high level of complacency and has historically preceded a correction. A chart of the S&P 500 (SPX) shows that when it has corrected in the past year, it's fallen back to its 100 day moving average (this holds true for both the simple moving average as well as the exponential moving average). Today, the SPX is trading around 1800 and its 100 dma is at 1720. This doesn't mean that the market is poised to drop tomorrow--what it does indicate is a high probability of it falling sooner rather than later. Although we've just had a brief (and much needed) sell-off, I do think it would be wise to book profits on market rallies. Historically, the Santa rally is favored but you never know when the jolly fat man is going to leave us with a lump of coal instead of that shiny new sled.
Today's good economic figures sent housing and housing related stocks up along with banks and insurers. Breaking out of recent consolidation patterns to hit multi-year highs are the semiconductor etfs SOXX and SMH
. Chugging to yet another new high is the Information Technology etf VGT
. I would be a little careful of jumping in on these with both feet--especially the VGT--as their charts are becoming over-extended. December 5, 2013 2:30 pm ET: Intraday support/resistance:
VIX 14.7/15.5 (rising VIX is bearish)
Trin range: 0.8 - 1.2 (rising Trin is bearish)
Average VWAPs: +64/-54 (bull/bear battle) December 4, 2013 1:50 pm ET: Intraday support/resistance:
VIX 14.2/15.7 (rising VIX is bearish)
Trin range: 0.65 - 0.95
Average VWAPs: +30/-134 (very bearish) December 3, 2013 1:45 pm ET: Intraday support/resistance:
Trin range: 0.95 - 1.25 (rising Trin is bearish)
Average VWAPs: +37/-90 (bearish) December 2, 2013 1:45 pm ET: Intraday support/resistance:
Trin range: 0.6 - 0.85 (bullish)
Average VWAPs: +63/-70 (bull/bear battle) Market Notes (4:00pm ET):
Trading action on Cyber Monday has traditionally been to the downside and today's action did not disappoint. The VIX appears to be closing above 14 for the first time since mid-October. Does this mean that the Santa rally is unraveling? No, it does not necessarily mean that, but what it does mean is that the market is overdue for some consolidation. We could see some price degradation over the next week or so but I do think that the march will resume to the upside going into the New Year. The fate of this year's Santa Claus rally could be determined by this Friday's jobs numbers. November 29, 2013 12:10 pm ET: Intraday support/resistance:
Trin range: 0.7 - 0.9 (bullish)
Average VWAPs: +45/-26 (low volume day--everyone out shopping!) Market Notes (12:20pm ET):
With less than 40 minutes to go in this holiday shortened trading day, we could see a rally going into the close as the intraday levels indicate that there's room for more upside. But since this is also the lat trading day of the month and managers are rebalancing portfolios, we could also see some heightened volatility as well. True to history, this Thanksgiving week looks to end higher with the Nasdaq and the Russell leading the pack at 1.7% and 1.8% respectively. Trading action on Cyber Monday has historically been weak so if you're looking to take some chips off the table, I'd do it right now. November 27, 2013 1:50 pm ET: Intraday support/resistance:
Trin range: 0.6 - 0.95 (bullish to neutral)
Average VWAPs: +39/-63 (mildly bearish at the moment) Market Notes (2:00pm ET):
Stocks came roaring out of the gate this morning have been fading since. It appears as if traders are leaving early to celebrate the Thanksgivukkah holidays. (Did you know that Hannukkah hasn't been this early in a century? According to Bloomberg, there's been a run on turkey menorrahs.) As of this writing, the Dow Industrials have just moved into the red and the S&P is thisclose to doing the same. The bulls shouldn't worry that their trades will turn into turkeys as rallies are more the norm than the exception on Black Friday. Puppy Uppers:
Regional banks (KRE, IAT) continue to outperform and is one of the very few remaining areas (in the US market) that offers decent value. Both IT (VGT) and Aero & Defense (PPA) continue to advance to new all-time highs while Tech (XLK) hits a new yearly high. In currencies, the British pound (FXB) has been on a roll and is now testing recent highs. Doggy Downers:
Oil etfs (OIL, USO, DBO) all broke through recent support levels, shedding 2% just today (that's a lot for these guys). This is a bearish sign indicating further downside. The Canadian dollar--aka the Loonie--has been in the doldrums and today sunk to a new yearly low. Many consider the loonie to be somewhat of a proxy for natural resources and with the dramatic decline in gold along with the fall in oil, we can see why the loonie has been a losing proposition. A long Brit pound/short Loonie trade would have been a very good bet! November 26, 2013 2:00 pm ET: Intraday support/resistance:
Trin range: 0.95- 1.25 (rising Trin is mildly bearish)
Average VWAPs: +100/-32 (bullish) Market Notes (2:20pm ET):
Historically, the market has rallied 80% of the time during the Thanksgiving week and it appears as if this year is no exception. This market is so strong that even a dreary consumer confidence number (released earlier today) can't hurt it. Trade Idea:
If you have a little mad money, you may wish to consider buying call options or call spreads on index tracking stocks (I'd go for the QQQ's) today and sell them on Friday just before the market closes. (Note: The market will close early at 1pm ET on Friday.
) Levered index etfs could also be used in place of options--the triple levered Nasdaq 100 etf, TQQQ, would be my pick. November 25, 2013 1:45 pm ET: Intraday support/resistance:
Trin range: 0.9 - 1.1 (neutral)
Average VWAPs: +72/-46 (moderately bullish but bears still in the picture) November 22, 2013 Weekend Wrap-up:
Wow-wee, this market can't be stopped! The small correction we had for the first three days of this week was quickly extinguished by the bulls who are refusing to let the bears take control. Today we saw follow-through to yesterday's rally with the S&P, Dow Industrials, and Russell 2000 breaking out to new all-time highs. The burning question remains: Can this rally last?
If history is any indication, 82% of the time the market has rallied the last two months of the year (since 1928). Them's pretty good odds it will happen again this year but there are a few things to consider before plunging headlong into the bull run. The first is that the market is becoming richly valued. Yes, there are a few places where value can still be had (see below for one area) but they are getting harder and harder to find. The historical mean P/E (price to earnings) for the S&P is 15.5. Currently, that value stands at 19.8--more than 25% above the mean. While this number isn't that extreme, it is definitely on the high side. The second reason is that technically the market is overbought. This year, the market has rallied five times before correcting and each time it was 9% to 13% above its 200 dma before it corrected. As of today's close, the S&P is 10% above its 200 dma placing it smack dab in the correction zone. Of course, the market can rally more but each day of gains brings us that much closer to the precipice. Any hint that the economy is in trouble--say, disappointing Black Friday sales figures?--could just be the straw that breaks the camel's back. Regional banks are still attractively valued
Many months ago we noted how regional banks, which had been badly beaten down, were beginning to attract the attention of investors. Since then, share prices have been rising steadily pushing the bank and regional bank etfs (IAT, KRE, KBE)
to new highs. Leading the charge among the regional banks are the following: First Merchant (FRME, $20.35), BBCN Bancorp (BBCN, $16.29), Hancock Holdings (HBHC, $34.40),
and Wilshire Bancorp (WIBC, $9.89).
Although all of these have enjoyed a substantial increase in share price, they are still reasonably valued at 14 to 16 times earnings. Leaders that are higher up the P/E scale (17 - 23) yet still attractively valued are the following: First Midwest (FMBI, $17.78), MB Financial (MBFI, $31.60), Bank of the Ozarks (OZRK, $53.53),
and Sterling Financial (STSA, $31.63)
. On a purely technical basis, Bank of the Ozarks sports the most attractive chart and is the second lowest beta name of all the above mentioned stocks. A stock with a low beta is good if you're concerned about price volatility. On the flip side, this issue is also the one with the highest P/E. In conclusion, if you still wish to take part in the Santa rally, the regional banks offer solid value with a dividend kicker (1-3% yields on the above names).
Have a good weekend. Go UCLA Bruins!! 2:00 pm ET: Intraday support/resistance:
Trin range: 0.65 - 1.05 (bullish to neutral)
Average VWAPs: +58/-68 (bull/bear battle) November 21, 2013 2:00 pm ET: Intraday support/resistance:
VIX 12.2/13.1 (falling VIX is bullish)
Trin range: 0.8 - 1.2 (neutral to mildly bullish)
Average VWAPs: +90/-42 (bullish) November 20, 2013 1:30 pm ET: Intraday support/resistance:
VIX 12.65/13.95 (falling VIX is bullish)
Trin range: 0.65 - 1.0 (neutral to mildly bullish)
Average VWAPs: +54/-67 (bull/bear battle) Market Outlook (4pm ET):
Market internals are moving to the Sell side, a move that's showing up in the sector etfs. The previous market leaders--Materials (XLB), Utilities (XLU), Tech (XLK), Homebuilders (XHB), Consumer Discretionary (XLY), and Consumer Staples (XLP)--are all weakening. Only the Banks (KBE, KRE) and Financials (XLF) are holding up but even here, they're hanging on for dear life. While the VIX is still under 15, its overall direction appears to be up and it may not be long at all before it busts through that bull/bear dividing line. If you want to keep your long positions, you may wish to consider hedging your portfolio by buying put options on an index tracking stock (such as the SPY, DIA, or QQQ) while the price is still cheap. (One rule of thumb: Buy options when volatility is low; sell options when volatility is high.) Scroll down to the commentary on November 14th for another way to ride out a correction using options. November 19, 2013 1:45 pm ET: Intraday support/resistance:
VIX 12.9/13.7 (rising VIX is bearish but still in bull territory)
Trin range: 0.7 - 1.2 (rising Trin is bearish)
Average VWAPs: +27/-115 (bearish) Market Outlook (4pm ET):
The support/resistance levels indicated a down day and we got one. Market internals are growing increasingly negative as selling pressure gains strength. Several days ago the VIX hit 12 and promptly rebounded. If recent history is any indication, the VIX should continue to rally (although perhaps not in a straight line) increasing the likelihood of continuation to the downside. And why not? The market is clearly overbought and valuations are getting frothy. Chartwise, the SPX failed to close above 1800 yesterday while the Nasdaq couldn't best the 4000 level. The Dow Industrials (DJIA) has tried twice to top 16000 without success. This doesn't mean that those levels are off-limits forever, but they could be in the short term. Today's downward movement was led by the Dow Transports (DTX) suggesting continuation in that direction. Despite the fact that the VIX is rising, it's still well below the bull/bear dividing line at 15--the bears aren't back in the driver's seat just yet!
For the past several days I've been urging my subscribers to begin taking profits and/or hedging their long positions and I'm reiterating that recommendation today. This doesn't mean that we're in for a full correction but the probability of one is increasing so why take the chance? November 18, 2013 1:45 pm ET: Intraday support/resistance:
VIX 12.3/13 (rising VIX is bearish but still in bull territory)
Trin range: 0.8 - 1.25 (rising Trin is bearish)
Average VWAPs: +48/-85 (moderately bearish but bulls still there--generally a sign of sector rotation) Market Outlook (2pm ET):
The support/resistance levels are indicating another rangebound day with a neutral to mildly bearish bias. The SPX managed to break through the 1800 level but it may not have enough fuel to close above it. We'll see... November 15, 2013 2:00 pm ET: Intraday support/resistance:
DJIA 15875/15965 (the 15900 was just broken handily)
VIX 12/12.5 (VIX is now in contrarian territory--time to book profits and/or tighten up your trailing stops!)
Trin range: 0.6 - 0.85 (falling Trin is bullish)
Average VWAPs: +73/-48 (moderately bullish but bears are lurking) Market Outlook (4pm ET):
The support/resistance levels are indicating a rangebound day with a bullish bias. The SPX is nearing 1800 which could be a short-term top. Typically, these big even numbers become levels of psychological resistance and with the VIX now firmly in contrarian territory, we could definitely see the market pull back soon. November 14, 2013 2:00 pm ET: Intraday support/resistance:
DJIA 15800/15900 (the questions is now: will the Dow break 15900?)
VIX 12.25/12.95 (falling VIX is bullish but getting into contrarian territory)
Trin range: 0.8 - 1.05 (neutral)
Average VWAPs: +68/-45 (moderately bullish but bears are trying to stage a comeback) Market Outlook (4pm ET):
The Dow finally, finally! broke 15800. Not only that, but it's thisclose to breaking 15900. I thought it might hit that level today but it couldn't quite get there. But as Scarlett O'Hara said, Tomorrow is another day.
Not to throw a wet blanket on the slumber party, but Mr. Market is getting to be rather toppy , both fundamentally and technically. Fundamentally, many stocks are either already overvalued or becoming so, although there are some industry groups such as regional banks and insurance companies that still offer decent value. Technically, the VIX has been steadily dropping--good news for the bulls--but it is getting close to 12 which is a contrarian level. Sure, it can hover here for days or even weeks but eventually it rebounds triggering a market sell-off. To protect yourself from this eventuality, you may wish to book profits now and replace your long holdings with call options (or call spreads). Options offer the same amount of upside and limit your downside (to the cost of your position). This way you can sit on your cash and have it handy for when the market does correct while still being able to participate in any further upside. November 13, 2013 2:00 pm ET: Intraday support/resistance:
DJIA 15672/15798 (will the Dow break 15800?)
VIX 12.55/13.35 (falling VIX is bullish but getting into contrarian territory)
Trin range: 0.5 - 0.75 (falling Trin is bullish but it, too, is becoming contrarian)
Average VWAPs: +119/-22 (very bullish) Market Outlook (2:25pm ET):
The intraday resistance levels are elevated meaning that despite today's morning rally in the major averages, they still have a lot more room to run. However, both the VIX and the Trin are moving into contrarian levels indicating that a reversal could be in the cards. As I've been saying, the VIX can stay low for a while but it does eventually spring back. Compared with the VIX, the Trin is a much shorter-term indicator. What it is saying is that we could see a short break in the rally and even if it does fall at or below 0.5 (it's at 0.59 now), that doesn't mean that the major averages will experience a sharp reversal. It could just indicate that a brief period of consolidation is in order. Today, the S&P 500 hit an all-time high but the real question is whether or not the Dow can break that pesky 15800 level. November 12, 2013 2:10 pm ET: Intraday support/resistance:
VIX 12.65/13.15 (rising VIX is short-term bearish but VIX is still very bullish)
Trin range: 0.7- 1.1 (rising Trin is short-term bearish but still in neutral territory)
Average VWAPs: +50/-67 (bull/bear battle) Market Outlook (2:40pm ET):
Some bifurcation today in the major averages with all of them falling except for the Dow Transport Index (DTX). This is a ray of sunshine for the bulls as the index is considered a leader in market direction. On the flip side, we do have a VIX that is becoming so bullish it's nearing contrarian status. Also, the Dow Industrial Index (DJIA) is having a very tough time breaking 15800 and it could prove to be difficult to top before the end of the year.
Turning to sectors, retail (XRT, RTH) is looking strong
despite predictions for a downbeat holiday sales season while banks (KRE, IAT, KBE) and financials (XLF) are are losing steam. Commodity weakness is being seen pretty much across the board with coffee (JO) being one of the few bright spots.
Poor Joe has been grinding down steadily since 2011 having shed 75% of its value since then--what a great short that would have been! But lately its stock has been perking up. (Sorry, I couldn't resist.) Has it finally found a bottom? It's too soon to tell but if it can manage to break above $23, I'd be a lot more bullish on a rally continuation. That's it for now. November 11, 2013 1:40 pm ET: Intraday support/resistance:
VIX 12.35/12.95 (VIX now in contrarian territory)
Trin range: 0.6 - 0.95 (neutral)
Average VWAPs: +70/-40 (moderately bullish) Market Outlook (2pm ET):
The major averages look to be rangebound today with a bias to the upside. Although they're not very exciting, the one thing that is worth noting is the drop in the VIX. Anytime the volatility index has approached 12, the market has reversed. But please don't think that a reversal is imminent! Historically, the VIX has demonstrated that it can hang out at low levels for a while. So, while I wouldn't jump into short positions with both feet just yet, I would tighten up my stops and ready my bearish watch list to take advantage of the correction when it actually does arrive which could be later today, tomorrow, or even a few weeks from now. November 8, 2013 2:10 pm ET: Intraday support/resistance:
VIX 13.1/13.8 (falling VIX is bullish)
Trin range: 0.7 - 0.9 (falling Trin is bullish)
Average VWAPs: +117/-38 (very bullish) November 7, 2013 2:20 pm ET: Intraday support/resistance:
VIX 12.9/13.8 (rising VIX is bearish)
Trin range: 1.05 - 1.6 (rising Trin is bearish)
Average VWAPs: +50/-141 (very bearish) Outlook (4pm ET):
That divergence we noted yesterday along with the increase in selling pressure were the canaries in the coal mine warning us of a sell-off. The selling pressure intensified today and was broadly diversified as all sectors were trading in the red (on my screen at least). Breaking support levels were some of the recent high fliers: Telecom (IYZ), Internet (PNQI), Materials (XLB)
, and Consumer Discretionary (XLY)
. The decline in these sectors put pressure on the small-cap Russell 2000 (RUT)
and the tech-heavy Nasdaq
, both of which also violated recent support levels. The VIX popped out of bullish contrarian territory, jumping nearly 10% to close just under 14. While all of these are signs that 'da bears may be stepping back into the ring, I would wait until after tomorrow's employment report before entering into any bearish positions. Worse than expected numbers could spark a rally (because that will mean that the Fed will likely not end its bond buying program soon) and I wouldn't like to be caught on the short side should that be the case. November 6, 2013 2:00 pm ET: Intraday support/resistance:
VIX 12.75/13.35 (VIX under 15 is bullish but getting into contrarian territory)
Trin range: 1.0 - 1.2 (neutral, but rising which is bearish)
Average VWAPs: +49/-119 (bears have the upper hand) Outlook (2:50 pm ET):
While the Dow Industrials merrily advances to a record high, the Dow Transports are moving lower. This divergence is telling us that something is going on. The rise in negative VWAPs are showing us that institutions are unwinding their positions out of their now over-valued issues while the heightened positive VWAPs indicate buying in the lower valued spreads. On top of all this, we have the VIX dipping below 13 which is the beginning of bullish contrarian territory. Every time the VIX spends some time in this region, the market turns around. This happened in mid-May, early August, and mid-September. While the VIX still has more room to fall, I'd be vigilant with my stop-losses and consider booking profits in those high-flying issues that are starting to lose steam. November 5, 2013 1:35 pm ET: Intraday support/resistance:
VIX 12.85/13.65 (VIX under 15 is bullish)
Trin range: 0.7 - 1.0 (neutral/bullish)
Average VWAPs: +87/-49 (bulls in the driver's seat but bears are gaining ground) November 4, 2013 12:45 pm ET: Intraday support/resistance:
VIX 13.0/13.7 (falling VIX is bullish)
Trin range: 0.8 - 1.0 (neutral)
Average VWAPs: +79/-39 (bulls with the upper hand--for now) Outlook (3pm ET):
The Dow Transports gapped up to a new all-time high and are single-handedly pulling the rest of the major averages up from their earlier lows. The intraday levels indicated that the Transports would likely continue to rally and the VIX continue to fall--both augurs of a market rally continuation. While the VIX is falling, it's still not in the contrarian zone (near 12) so you bulls don't have to worry, at least not until Friday when the unemployment and personal spending figures are released.
Today's highlights include a Goldman-Sachs upgrade in the steel industry. Shares of US Steel (X), AK Steel (AKS), Steel Dynamics (STLD),
along with the steel etf (SLX)
all broke out to new highs. You may be tempted to jump in here on some of these issues but I'd urge you to wait to see if there's any follow through. What concerns me are the doji stars appearing in the charts of X and STLD while a long topping tail is forming in the chart of AKS--all are bearish candlestick patterns. Long Trade Idea:
In other commodity news, the chart of the metals and miners etf (XME, $40.95)
is breaking out of an inverse head and shoulders pattern. Judging from the size of this pattern, share price could easily rise to retest the earlier highs in the $46-47 range. The XME has a fairly liquid options field and buying a longer term call here (at least 3 months out) could be good move especially considering that market volatility is so low. November 1, 2013 1:25 pm ET: Intraday support/resistance:
VIX 13.35/14.05 (rising VIX is bearish)
Trin range: 0.55 - 0.95 (bullish contrarian)
Average VWAPs: +59/-82 (bull/bear battle with bears gaining momentum) October 31, 2013 2:10 pm ET: Intraday support/resistance:
VIX 13.2/14.0 (falling VIX is bullish)
Trin range: 0.75 - 1.1 (neutral/bullish)
Average VWAPs: +126/-41 (very bullish) Outlook (3pm ET):
Wow! I sure didn't expect the major averages to zoom to their intraday resistance levels this quickly. The Nasdaq was the only major average that wasn't quite able to hit its target but the trading day isn't over yet. Market internals are bullish and with both the Trin and the VIX still elevated (as opposed to being bullish contrarian) there's still more room left for further upside movement. But seeing as how today is Halloween and considering that the market is overbought, what we could be witnessing is nothing more than smoke and mirrors. Let's hope we don't get tricked by the Ghost of Corrections past! October 30, 2013 2:30 pm ET: Intraday support/resistance:
VIX 13.7/14.5 (rising VIX is bearish)
Trin range: 0.75 - 1.35 (neutral)
Average VWAPs: +36/-159 (extremely bearish, but note that VWAPs are dynamic) October 29, 2013 1:30 pm ET: Intraday support/resistance:
Trin range: 0.75 - 1.3 (neutral)
Average VWAPs: +75/-62 (bull/bear battle) Outlook:
Market internals today are at sixes and sevens with each other. First off, we have a Trin that's been steadily falling from its early morning high near 1.3 (now at 0.74)--a bullish indication. On the flip side, the VIX has been moving up off its earlier low--a bearish sign. Rising positive VWAPs and falling negative VWAPs are showing that the bulls are successfully fighting off the bears and are moving back into the driver's seat. Even the major averages can't agree on a direction. As of this writing (11:10am PT), the S&P and the Dow Industrials have moved back to retest their earlier highs while the small-cap Russell 2000 is sliding to its new intraday low.
What we could be witnessing is rotation away from riskier assets (small-caps) into safer assets (large caps which is what makes up the Dow and the S&P). This could be a one day event or the start of a trend. If it's the latter, this could be the canary in the coal mine that the market is topping. Regard this as a time to tighten up your stop-losses and begin booking profits. October 28, 2013 2:20 pm ET: Intraday support/resistance:
Trin range: 0.8 - 1.1 (neutral)
Average VWAPs: +68/-54 (bull/bear battle still raging with bulls gaining the edge at the moment) Outlook:
The major averages are still in rally mode and the good news for the bulls is that the market leading Dow Transport Index (DTX) continues to advance. The Trin continues to hang out in neutral territory while the low VIX shows the absence of fear. However, the negative VWAPs are elevated, indicating either a sell-off into strength or sector rotation (or perhaps a combination of both). The rise of foreign stocks populating the percent gainers and new yearly highs lists show that a rotation into beaten down foreign stocks has been going on for the past several months.
Today's clear sector winner is Consumer Staples
. It's tracking stock, the XLP, broke out to a new all-time high (since 1998 inception) on four times normal volume. No surprise here as many of the big names in this sector also hit new highs: Kimberly Clark (KMB, $108), Colgate-Palmolive (CL, $65), Foot Lock (FL, $35), Hain Celestial (HAIN, $86), Walgreen's (WAG, $60)
, to name a few. If you're looking to buy into these names, please note that many of them are fully valued on a P/E basis. However, staples stocks generally pay a dividend (most in the 2-3% range) and can make really good candidates for covered call income generating strategies. October 25, 2013 12:45 pm ET: Intraday support/resistance:
Trin range: 0.8 - 1.0 (neutral)
Average VWAPs: +62/-69 (bull/bear battle) Outlook:
This morning's opening pop quickly faded as the bears attempt to move in. While most of the major indices are barely treading water, the market leading Dow Transport Index (DTX) is in the red. On top of that, the intraday support levels indicate further downside, a view supported by the downward trending action in the intraday charts of the S&P, Nasdaq, and Russell (lower highs and lower lows). The heightened VWAPs on both the buy and sell sides reflect the bull/bear struggle and it really is anyone's guess how the trading day will end. October 24, 2013 2:20 pm ET: Intraday support/resistance:
VIX 13/13.6 (falling VIX is bullish)
Trin range: 0.9 - 1.4 (falling Trin is bullish)
Average VWAPs: +106/-52 (bulls in control but bears are still hanging around) Outlook:
Yesterday's high Trin was telling us that a reversal was very likely and boy did we ever get one! All of the major averages are in the green and with the Dow Transports leading the way, the bulls have something to cheer about. This market is definitely running on the assumption that the Fed will continue being accommodative for the near term at the very least. Earlier today on CNBC, one guest pundit from Morgan Stanley who used to work at the Fed believes that the Fed won't even begin to consider tightening until March at the earliest. This is the type of outlook that comes as music to the ears of the bulls and so long as this belief is in place, we should expect the rally to continue. However, the market usually doesn't go up in a straight line and we are becoming overdue for some type of consolidation. If you want to take a bullish stance, I'd wait for a pullback. Let's just hope we get one! October 23, 2013 1:45 pm ET: Intraday support/resistance:
VIX 13.7/14.2 (rising VIX is bearish)
Trin range: 1.2 - 1.7 (Trin getting into bearish contrarian territory--a bullish reversal could be in the cards)
Average VWAPs: +85/-46 (bull/bear battle with (surprise! surprise!) the bulls getting the upper hand) Outlook:
Boy, trying to find today's inflection points wasn't easy and it appears where I thought they might be may not be correct. (Hey, nobody's right all the time!) The intraday levels are saying that we should expect movement to the downside, but the major averages are flipping the bird to that assumption. BUT, the day isn't over yet and I still might get the last laugh.
Bolstering the bullish case is the Trin. Now at 1.7 it has entered the bearish contrarian zone. Also supporting the bulls are the rising positive VWAPs. However, today's jump in the VIX is telling us that fear is entering the market and even if the major averages do rally today, the movement could be short-lived. The markets are all overbought and so consolidation is definitely in order. What should you do? Follow Carl Icahn's Netflix trade--if you've made some decent gains, now is the time to book profits. Carl took enough chips off the table to cover his original investment and is now playing with free money which is always a nice position to be in. October 22, 2013 2:10 pm ET: Intraday support/resistance:
VIX 12.85/13.95 (VIX is falling from early morning high which is bullish)
Trin range: 1.2 - 1.6 (Trin is elevated compared with yesterday indicating increasing bearishness but is falling intraday which is short-term bullisyh)
Average VWAPs: +68/-76 (big bull/bear battle!) Outlook:
Today's trading action appears to be a repeat of yesterday's albeit at higher levels. The intraday support/resistance levels are saying that the major averages have put in their highs of the day and could actually close in the red. Rising negative VWAPs (a measure of institutional trading) supports this hypothesis and although the Trin is falling just like it did yesterday, it has jumped to a higher level indicating that selling pressure is intensifying. On the other hand, the heightened positive VWAPs indicate that buyers aren't going away, either. These bull/bear battle days can be rollercoaster rides--great for momentum and day traders. Right now it's anyone's guess who will triumph but if I had to place a bet, I'd be putting my money on 'da bears. October 21, 2013 Market Notes
: Volume was light today as Wall Street waits on tomorrow's earnings report, delayed because of the recent government shutdown. Trading action was muted ahead of the announcement providing investors will little clue as to what to expect. Despite lackluster action across most sectors, there were a few areas of notable interest. Lowlights:
The oil space has been selling off since it peaked a month and a half ago. Today, two oil etfs broke support: OIL
fell below $24 and is now testing major support at $23.50 while USO
broke through both the $36.50 and $36 levels on its way to test major support at $35.50. While the oil/gas drillers and explorers have appeared to be immune to this bearish action in the underlying commodity, today's topping tails seen in many of their etfs (XOP, IEO, XES, PSJ, OIH) indicate that buying pressure is drying up. If you're long stocks in any of these areas, now is the time to set trailing stop losses. Coffee (JO, $22.85) continues to get ground up.
This commodity etf has shed over 70% from its 2011 peak value and continues to hit new all-time lows (since the fund's 2005 inception). And yet Starbuck's still charges over $4 for a latte! Their margins had better be increasing... Highlights:
Shares of Apple Computer (AAPL, $521)
broke out of a cup-and-handle base on slightly heavier than normal volume. The company is putting on its annual pre-holiday gadget show tomorrow which could be the reason investors are getting fired up (and today's upgrade probably didn't hurt, either.)
The auto component space
has also been garnering a lot of investor attention. The following stocks have been in strong uptrends with increasing volume and broke out to new highs today on strong volume: 1. GNTX ($27.59, +3.5%)
--makes dimmable mirrors for cars and planes; 2. CXDC ($5.54, +10.1%)
--Chinese maker of plastic auto trim and components; 3. QTWW ($5.40, +6.7%)
--provides CNG storage tanks and fuel systems for hydrogen, electric, and hybrid cars; 4. SORL ($5.27, +12.1%)
--Chinese brake maker to automobile OEM's and aftermarkets. I'm not sure why these companies are in the spotlight other than they appear to be undervalued, and finding a company that is undervalued is becoming increasingly difficult in this frothy market. 1:50 pm ET: Intraday support/resistance:
VIX 13.25/13.65 (rising VIX indicates bears moving in, but under 15 means bulls still in control)
Trin range: 0.75 - 1.2 (Trin falling from Friday is bullish)
Average VWAPs: +48/-62 (bull/bear battle with bears gaining the upper hand at the moment) Outlook:
The intraday support/resistance levels are saying that the major averages have put in their highs of the day already. Rising negative VWAPs (a measure of institutional trading) confirm this hypothesis but a falling Trin suggests the opposite. Hanging out in a tight trading range, the VIX isn't being any help in breaking this tie of the internals. But some consolidation after a great eight day rally is to be expected. Going forward, it appears as if we have more room to run as evidenced by the fact that the Dow Transport Index (DTX), a leading indicator of market direction, is continuing its uphill march. October 18, 2013 2:10 pm ET: Intraday support/resistance:
VIX 12.35/13.45 (low VIX is bullish but it is rising intraday which could mean a sell-off going into the close)
Trin range: 1.2 - 1.6 (bearish to bearish contrarian)
Average VWAPs: +93/-46 (bullish, but bears are not going away) October 17, 2013 12:45 pm ET: Intraday support/resistance:
VIX 12.8/13.6 (bullish)
Trin range: 1.1 - 1.45 (bearish to bearish contrarian)
Average VWAPs: +105/-32 (very bullish) Outlook:
It always takes me ten to twenty minutes to post this from the time that I determine the intraday levels. When that happened today, the SPX was near 1728--now it's closing in on 1730 which would be its all-time high as well as today's estimated peak level. 1730 is also the level deemed by some market mavens to be where the S&P is fully valued based on the upper value of the historical price-to-earnings (P/E) range. I do think that this level could be one of major resistance, both technical and psychological, but if the index should blow through it, then it could go significantly higher. p> Market internals are at sixes and sevens with each other today. The sharp drop in the VIX plus the very high positive VWAPs are almost bullish contrarian (meaning that a move to the downside is in the cards) while the elevated Trin is bearish contrarian, indicating that a move to the upside is probable. An alternate explanation could be that there is sector rotation going on, that is, investors and money managers are selling positions in over-valued sectors and buying into sectors that are expected to do well in a continuing low interest rate environment. (This is assuming that Janet Yellen will be the next Fed chair.) One thing is for sure, though--we certainly are living in interesting times! p> October 16, 2013 1:40 pm ET: Intraday support/resistance:
Trin range: 0.6 - 1.0 (bullish)
Average VWAPs: +75/-44 (bullish but bears haven't gone away) Outlook:
The news that Congress has finally come to an agreement and the government may reopen as early as tomorrow was just the rocket fuel the bulls needed to blast ahead. Not only are the major averages soaring but even more noticeable is the deflation in the volatility index (VIX). It's as if someone let the air out of a balloon. Right now, the VIX is dipping back under 15 and a close beneath this level would indicate that the bulls are sliding back into the driver's seat. October 15, 2013 12:50 pm ET: Intraday support/resistance:
Trin range: 0.55 - 0.85 (Trin getting into bullish contrarian zone)
Average VWAPs: +40/-57 (bull/bear battle with bears having the edge at the moment) Outlook:
The bulls' energy is starting to flag as Congress continues to drag its feet regarding a budget resolution. While the intraday levels appear to support the bulls (as evidenced by resistance levels being higher than the current intraday highs), the VWAPs are showing that the bears are gaining a foothold. Also, the Trin is approaching the bullish contrarian zone (in the 0.5 range) meaning that the likelihood of a market reversal to the downside is increasing. If you're not in the mood for a seesaw ride, this is one day to sit on the sidelines. October 14, 2013 2:10 pm ET: Intraday support/resistance:
VIX 15.75/17.75 (VIX falling from opening high is bullish)
Trin range: 0.5 - 1.2 (falling Trin is bullish)
Average VWAPs: +122/-17 (very bullish) Outlook:
News that a budget agreement could not be reached over the weekend sank the market on the open, but the fact that lawmakers remained to forge an agreement over the Columbus Day holiday is providing investors with optimism that an accord will be reached. Judging from today's strong intraday rally, it would seem as if the general consensus is that an agreement will be reached fairly soon. The intraday resistance levels are showing that the major averages still have more room to rally. We'll see if that happens... October 11, 2013
Me (in the glasses) next to CNBC's Fast Money Chairwoman Karen Finerman at the Milken Institute yesterday. Karen's cousin Alissa Finerman is next to Karen on the right. Alissa used to be a bond trader on Wall Street and is now a life coach and author of the book Living in Your Top 1%. She is also one of the top doubles players in tennis over a certain age.
FYI, top Hollywood producer Wendy Finerman is Karen's sister. This family is scarily accomplished!
(Note: This photo was taken with a wide angle lens making us all look wider than we really are.) 1:25 pm ET: Intraday support/resistance:
VIX 15.3/16.4 (falling VIX is bullish)
Trin range: 0.95 - 1.5 (rising Trin is bearish)
Average VWAPs: +84/-30 (bullish) Outlook:
The bulls are sliding back into the drivers seat but they're not ready to buckle their seat belt until the VIX falls back under 15. Intraday resistance levels are above the current intraday highs meaning that the major averages have the potential to rally further. However, an elevated Trin is suggesting that the bears aren't about to sit still and just hand the keys over to the bulls without some sort of fight. Because of this, we could well see some choppiness going into the closing bell. October 10, 2013 2:15 pm ET: Intraday support/resistance:
VIX 16.55/17.95 (VIX gapping down is very bullish)
Trin range: 0.6 - 1.1 (falling Trin is bullish)
Average VWAPs: +67/-52 (rising negative VWAPs is reflecting increasing selling pressure--we may have already seen the highs of the day) Outlook:
Well, we got that rally follow through in spades today and if you had put some money on the inverse VIX etf, the XIV, as suggested yesterday, you'd be up by 7% at the very least. Today's intraday resistance levels were difficult to determine because of the early morning gap up. When buying pressure is this explosive, it becomes difficult to accurately determine inflection points. In fact, I wasn't able to find one for the Nasdaq which is why it is absent from today's support/resistance list.
As of this writing, market internals are deteriorating--the negative VWAPs are rising and the VIX is rebounding meaning that buyers have stepped away from the table. While it's likely we'll see lackluster market action going into the close, it doesn't mean this rally is over. Both the VIX and the Trin still have lots more room to fall which is what the bulls will need to get back into this market. October 9, 2013 1:55 pm ET: Intraday support/resistance:
VIX 19.25/21.35 (VIX is dropping like a stone--bullish)
Trin range: 0.8 - 1.7 (falling Trin (from a contrarian 1.7) is bullish)
Average VWAPs: +128/-41 (very bullish) Outlook:
Market internals are all screaming buy! buy! buy! as the major averages rebound sharply off their mid-day lows. Yesterday we noted that the Trin was in bearish contrarian territory so today's turnaround shouldn't have come as a surprise. The intraday support/resistance levels suggest that the current rally may not yet be over as there is still plenty of upside left in most of the major averages except for the Dow Industrials which may have already peaked. Players with some appetite for risk may wish to toss a few schekels into a short-VIX vehicle for a short-term trade. I prefer the XIV--a product that's a lot more stable than any of the leveraged VIX exchange traded vehicles. October 8, 2013
The markets continue to slide with most of the major averages breaking key support levels today:
|Index||Key Support||Next Support|
|DJIA||14915||14750 (then 14500)|
Nearly all sector etfs were trading in the red. Today's biggest losers were current market darlings the internet stocks (PNQI)
and biotechs (IBB, FBT, BBH
). Both groups were down by at least 4% over yesterday's closing prices and all of the above mentioned etfs are now testing minor support levels. These groups have been getting quite frothy and are due for a breather and I'd be surprised if these current support levels held. Other sector breakdowns were seen in Shipping (SEA), Materials (XLB),
and Retail (XRT)
International stocks didn't fare a whole lot better, either. The Vanguard Europe etf (VGK)
--considered one of the global benchmark funds--broke $54 support today. The fact that UK stocks, represented in part by the UK etf (EWU)
, have been dropping lately likely didn't help the VGK cause. Investors long these two funds may wish to consider hedging their holdings or lightening up their positions.
That's the long and the short of it for now. 2:15 pm ET: Intraday support/resistance:
VIX 19/21 (VIX over 20 is very bearish)
Trin range: 0.65 - 1.8 (Trin now at 1.8 is in contrarian territory-->market reversal could be imminent)
Average VWAPs: +19/-164 (extremely bearish/bearish contrarian)
Outlook: Right now we may be at the lows of the day judging from the extreme values in both the Trin and the VWAPs. A relief rally going into the close looks very likely. October 7, 2013 1:10 pm ET: Intraday support/resistance:
VIX 18.1/19.1 (VIX gapping up is very bearish)
Trin range: 0.65 - 0.95 (neutral)
Average VWAPs: +41/-53 (bull/bear battle)
Outlook: The jump in the VIX is a bearish sign signaling continued market weakness. Long-term investors should stay on the sidelines and keep current positions hedged until the budget battle is resolved one way or the other. October 4, 2013 Market Notes
The downward slide in the Dow Industrials seems to have found support at the psychologically critical 15000 level. But unless Congress can come to a budget agreement and raise the debt limit, I don't think this level will hold. The elevated VIX means that investors are far from certain that an outcome is imminent and we could see the mighty Dow retest its late August low of 14760--and soon.
Let's hope that Congress will be able to work out a budget deal and raise the debt ceiling, but what if they don't? PIMCO's bond guru, Bill Gross, was quoted recently as saying the probability of the US defaulting on its debt is a million to one or even a billion to one. But CNBC's market madman Jim Cramer thinks that it could be as low as four to one--and that's scary. If the US can't meet its debt obligations, it could raid your savings and retirement accounts in order to pay its bills. I do think that investors should strongly consider putting part or all of their retirement accounts out of easy reach of the government by transferring them to a foreign entity along with diversifying into foreign stocks and currencies. (See this article
for more info.) If you have a lot of cash tied up in American dollars, you may want to diversify that into a physical basket of foreign currencies and keep these currencies tucked away in your fire-proof basement safe. I'm truly hoping that the worst case scenario does not play out, but I'd rather err on the side of paranoia than be left with an essentially worthless retirement account denominated in devalued dollars. Subscriber Notes:
There is one new Stock Darling. 1:50 pm ET: Intraday support/resistance:
VIX 16.3/17.9 (falling VIX is bullish)
Trin range: 0.7 - 1.1 (bullish to neutral)
Average VWAPs: +80/-31 (bulls have the upper hand for right now)
Outlook: The lack of today's employment report (and potentially bad news) helped to buoy the major averages. While the VIX is coming down, it's still in negative territory so you bulls shouldn't be jumping into the saddle yet. Wait at least until Congress has sorted out the budget and the debt ceiling which could take up until the last minute, according to previous history. Till then, I'm expecting heightened volatility and schizophrenic market action--bad for long-term investors but good for day-traders and swing traders. October 3, 2013 2:05 pm ET: Intraday support/resistance:
VIX 16.5/18.7 (rising VIX is bearish)
Trin range: 0.7 - 1.2 (rising Trin is bearish)
Average VWAPs: +56/-47 (bull/bear battle)
Outlook: The market tanked and the VIX soared this morning on debt default fears. Yesterday, Bill Gross said that he thinks that the probability of such an event are a million to one or even a billion to one. To contrarians, statements such as these make them nervous and justifiably so (remember Murphy's Law?). Let's hope and pray that Bill is right. If not, today's VIX value of over 18 is going to be a bull's dream. October 2, 2013 2:00 pm ET: Intraday support/resistance:
VIX 16/16.8 (rising VIX is bearish)
Trin range: 0.5 - 0.8 (falling Trin is bullish)
Average VWAPs: +85/-30 (buying pressure is rising which is bullish)
Outlook: Today's opening sell-off was short lived as buyers stepped in. The Trin and the VIX are both at odds with each other indicating a bifurcation in the minds of investors. The fact that the VIX is rising trumps the Trin which is an indicator that is more reflective of current sentiment than future sentiment (as is the VIX). I wouldn't be surprised if this morning's retracement fizzled going into the close. September 30, 2013 2:00 pm ET: Intraday support/resistance:
VIX 15.9/16.7 (early pop in VIX is bearish but has been falling which is bullish)
Trin range: 0.7 - 1.3 (rising Trin is bearish)
Average VWAPs: +72/-34 (growing +VWAPs is bullish)
Outlook: Support/resistance levels are indicating further upside to the bullish rally off the early morning lows. The DTX is leading the rally while the VIX is falling--both bullish signs going into the close. September 27, 2013 2:05 pm ET: Intraday support/resistance:
VIX 14.6/15.3 (rising VIX is bearish)
Trin range: 0.95 - 1.3 (rising Trin is bearish)
Average VWAPs: +60/-40 (bulls now having a slight edge)
Outlook: Support/resistance levels are indicating a rangebound market for the rest of the day. Note that the VIX has popped back up over 15--that's a bearish event. Also, watch out if the DTX closes under 660 support. September 26, 2013 2:15 pm ET: Intraday support/resistance:
Trin range: 0.75 - 1.1 (neutral)
Average VWAPs: +50/-61 (bull/bear battle)
Outlook: It appears that the major averages could be in for a bit more downside before the end of trading today. The negative VWAPs are increasing meaning that selling pressure is intensifying and we could see the major averages close at their daily lows. However, the relatively high positive VWAPs are telling us that the bulls aren't going to go down without a fight. September 25, 2013 Sugar and spice--is everything turning nice in the soft commodities?
Things are looking up for some of the agricultural commodity etfs (aka soft commodities). This entire group has been badly beaten down for the most part but some may be in the throes of a turnaround. One of today's biggest gainers was the Wheat etf (WEAT, $16.70)
which jumped over 1.8%. This may not sound like much but this is a pretty big move in the soft commodity space. Although this etf has shed 38% in the past year, today's move does not necessarily mean the drop is over. A break above $17 resistance, however, would lend credence that the worst is behind it.
Another big upside mover today was the Sugar etf (SGG, $61.83)
which gained 1.7%. The stock has been basing for the past four months and today it was able to hurdle $61.50 resistance on twice normal volume. This is a bullish move and likely represents the beginning of a rally in this commodity. (FYI: There are options but they are thinly traded.)
While it appears that investors are developing a craving for sugar, they are losing their taste for chocolate. Last week a topping tail was spotted in the Cocoa etf (NIB, $34.17)
marking the top of a two month rally. Since then, the stock has fallen by roughly 4% and is closing in on major support at $34. A break beneath this level would put further pressure on the stock, likely forcing a drop to the $32 support level. 2:15 pm ET: Intraday support/resistance:
Trin range: 0.7 - 1.05 (falling Trin is bullish)
Average VWAPs: +55/-55 (bull/bear battle)
Outlook: The outlook for all of the major averages is surprisingly bullish! But you'd never know it by looking at the charts right now which are all moving down. It's also a dead heat between the positive and negative VWAPs (a measure of institutional buying and selling) but a falling Trin and a stable VIX suggest that a rally into the close could well be in the cards. September 24, 2013 Market Notes:
My apologies for not writing a blog for a while but due to increasing time constraints, it's getting more difficult to do. However, I don't want to alienate my readers and would like to at least give them a couple of ideas that may help their trading.
On the macro level, the major averages are having real trouble trying to sustain last week's surprise Fed pop. Today, the $SPX closed under 1700 psychological support and is 7 points away from testing minor support at 1690. The Dow Industrials (DTX) also broke a key level at 15400 today, closing in on minor support at 15300. Mr. Nazzie is having problems topping 3800 and the small-cap Russell 2000 (RUT) isn't sure what direction it wants to go. The VIX, while still under the bull/bear dividing line at 15, is showing signs that it wants to move up--a bearish sign. The recent pop over 14 doesn't bode well for the bulls. What with the debt ceiling dilemma coming up, current economic indicators showing mixed results, and a market that is fully valued, I'm expecting a choppy trading environment for the next month or two--good for momentum and swing traders but not the best environment for bulls or bears. Those of you who have nice paper profits may wish to tighten up your trailing stop losses to protect those gains.
That's it for now. 1:50 pm ET: Intraday support/resistance:
VIX 13.6/14.4 (falling VIX is bullish)
Trin range: 0.8 - 1.1 (falling Trin is bullish)
Average VWAPs: +108/-32 (bullish)
Outlook: All indicators are flashing green and although the major averages are showing signs of exhaustion (at the time of this writing) we could see another push going into the close September 23, 2013 1:30 pm ET: Intraday support/resistance:
VIX 14/14.7 (rising VIX is bearish)
Trin range: 1.0 - 1.5 (heightened Trin is bearish)
Average VWAPs: +67/-43 (bull/bear battle with bulls now having the edge)
Outlook: Further downside is predicted for the SPX and the Nasdaq but the RUT could fight the trend and end the day in the green; today's jump in the VIX is bearish September 20, 2013 2:00 pm ET: Intraday support/resistance:
VIX 12.5/13.7 (rising VIX is bearish)
Trin range: 0.75 - 1.55 (rising Trin is bearish)
Average VWAPs: +42/-112 (bearish)
Outlook: Further downside is expected is most of the major averages except for the Transports (DTX); rapidly rising Trin & VIX is bearish September 19, 2013 2:05 pm ET: Intraday support/resistance:
Trin range: 0.7 - 1.15 (rising Trin is bearish)
Average VWAPs: +39/-85 (moderately bearish)
Outlook: Further downside is expected but the fact that the Dow Transport Index (DTX) is holding up (so far) combined with a low VIX indicates that this bull run may have legs September 18, 2013 2:10 pm ET:
No intraday support/resistance levels today due to the Fed's decision to delay their anticipated bond tapering program. (There are no inflection points that would enable me to deduce the support/resistance levels.) September 17, 2013 2:11 pm ET: Intraday support/resistance:
VIX 14.25/14.75 (rising VIX is bearish)
Trin range: 0.6 - 0.9 (lower Trin on the open is bullish)
Average VWAPs: +73/-34 (moderately bullish)
Outlook: Further upside is expected in the Nasdaq and the Dow Transports (a bullish sign) but this action could be negated by the VIX which is rising (a bearish sign) September 16, 2013 2:15 pm ET: Intraday support/resistance:
Trin range: 0.7 - 1 (lower Trin on the open is bullish but has been slowly rising which is bearish)
Average VWAPs: +35/-83 (bearish)
Outlook: Major indices are falling from opening pop, especially tech-heavy Nasdaq and small-cap Russell 2000 (failure of the options market could have something to do with this), but Dow Transports remain fairly resilient which is good news for the bulls; the support/resistance levels are suggesting rangebound activity for the rest of the trading session September 13, 2013 1:45 pm ET: Intraday support/resistance:
Trin range: 0.9 - 1.25 (neutral)
Average VWAPs: +66/-38 (neutral with bullish bias)
Outlook: Major indices are rising from earlier low but appear to remain rangebound for rest of trading session September 12, 2013 1:35 pm ET: Intraday support/resistance:
Trin range: 0.95 - 1.25 (rising Trin is bearish)
Average VWAPs: +46/-52 (bull/bear struggle) September 11, 2013 2:05 pm ET: Intraday support/resistance:
Trin range: 0.75 - 1.2 (neutral)
Average VWAPs: +79/-40 (moderately bullish) September 10, 2013 1:50 pm ET: Intraday support/resistance:
Trin range: 0.8 - 1.1 (neutral)
Average VWAPs: +57/-43 (mildly bullish) September 9, 2013 2:40 pm ET: Intraday support/resistance:
Trin range: 0.5 - 0.75 (bullish/bullish contrarian)
Average VWAPs: +85/-31 (bullish) September 6, 2013 2:30 pm ET: Intraday support/resistance:
VIX 15.1/16.8 (falling VIX is bullish)
Trin range: 0.6 - 0.8 (bullish)
Average VWAPs: +104/-30 (very bullish) September 5, 2013
The market was on finger-hold today as traders standby for the unemployment figures due out tomorrow before the opening bell. Although I have to say while many stocks are still in bullish patterns, market internals and macro movements of the indices paint a different picture. The Trin at 0.45 this morning was telling us that the opening rally likely would not have legs. (A reading around 0.50 and under is contrarian.) The positive and negative VWAPs (a measure of institutional buying and selling pressure) was fairly evenly matched throughout the trading session providing further evidence that traders are staying on the sidelines. While the VIX continues to move down, it's still hanging out on the bearish side of 15. A better than expected jobs number could well send stocks spinning down the rabbit hole since that may be interpreted by many to mean the Fed will begin its bond tapering program sooner rather than later. Of course, speculation isn't worth the hot air it's printed on (how's that for mixing metaphors?) and we'll just have to hang onto our hats until tomorrow morning's report. Market Highlights: British retailers--Tally ho and away we go!
We've been noting increasing evidence of a global economic recovery and today positive action was seen in the charts of two British retailers. The first is multi-line apparel retailer Marks & Spencer (OTCF: MAKSY, $15.35).
. The company, affectionately known by their customers as Marks & Sparks, is a popular department store chain in the UK and in Europe, and I'm wondering when they'll be expanding into the US. The stock has been grinding its way up for several years and just broke above $15 resistance. Although it's come a long way, the share price is half of its pre-recession high of $30.
The second is home improvement retailer Kingfisher PLC (OTCF: KGFHY, $12.64)
. The company has been around for over 30 years and operates over 1000 retail locations under various names chiefly in the UK, Europe, and China. The stock just broke out to a new all-time high since its 2003 US debut. Priced at 16 times earnings, it's not overvalued compared with its peers. There's good news for both retailers on two fronts: the first is that their charts are both in strong upward trends, and the second is that they both pay a dividend. Current yields are 2.1% for Kingfisher and 3.1% for Marks & Sparks. The downside is that the average trading volume on both is a paltry 100k shares, so if you want to trade these issues here, beware of wide bid/ask spreads and use limit orders. Internationally savvy investors may wish to go to the London exchange to trade these issues directly. Make sure to do your due diligence first! 1:40 pm ET: Intraday support/resistance:
VIX 15.5/16.1 (falling VIX is bullish)
Trin range: 0.45 - 0.6 (bullish contrarian)
Average VWAPs: +49/-41 (bull/bear tug of war) September 4, 2013 Market Notes:
Although today's rally appears that the bulls are back in the driver's seat, the fact that the VIX is still elevated (above 15 is bearish) means that investors are nervous. We'll need to see the VIX move back below 15 and the marketing leading Dow Transport Index (DTX) move back above 640 before we can even think to say the bulls are back from their vacation. Market Highlights: Indications of a global recovery?
Today, shares in the country funds of Korea (EWY), China (FXI, GXC),
and Australia (EWA)
all broke resistance levels. The health of these countries are considered indications of global growth. Also, shares of marine shippers zoomed today, especially Genco (GNK, $3.33), Star Bulk Carriers (SBLK, $9.17), Euroseas (ESEA, $1.28), Navios Maritime (NM, $6.63), Baltic Trading (BALT, $4.77),
and Dryships (DRYS, $2.49)
all of which jumped 7%-10% on heavy volume. Combine these two facts with the blow-out domestic auto retail sales figures and you've got some serious indications that the global economy is firming up.
Assuming that a war in the MIddle East won't derail this growth, how can one position oneself to cash in on it? Well, the obvious way is to begin taking positions in the countries mentioned above as well as cashing in on the expected growth in marine shipping, an industry group that has been suffering. You can begin your fundamental research with the above shipping firms, and since I haven't done it myself, the only thing I can offer you is a technical opinion. Out of the above group, the chart of Navios Maritime (NM) is by far the best of the bunch, IMO. It's the least volatile and has been rallying steadily, doubling in price since January. One might think that it might be overvalued but its P/E is still only a measly 5. Income investors may like it for its 3.6% yield. No matter what, I do think there's a lot of value to be had in the shippers. If you can't decide on which one or ones to pick, look at the Shipping etf (SEA, $18.83)
. This is a more conservative play and it, too, pays a dividend currently yielding about 2.3% Subscriber Notes:
There is one new Stock of the Day. (Hint: It's not a shipper). 1:45 pm ET: Intraday support/resistance:
VIX 15.5/17 (falling VIX is bullish)
Trin range: 0.5 - 0.85 (bullish)
Average VWAPs: +85/-27 (bullish) September 3, 2013 Market Notes:
After an all-too-brief respite, I'm back in the blogging saddle--unfortunately, there's not a lot to be particularly cheery about. In my last entry on August 14th, I said that the bears will likely take control when the VIX heads above 15, an event that happened two days later. The general trend since then has been down despite the occasional counterattack by the bulls. I do expect heightened volatility for the next couple of weeks mainly due to Syria and Fed tapering concerns. For an excellent in-depth weekly summary of the markets, I strongly suggest perusing 361 Capital's (free) newsletter available on the company's website
or via email (sign up for it on their website). Chinese solar stocks on fire!
The stocks of four Chinese makers of silicon-based solar panels have been a welcome ray of sunshine in this otherwise dreary market. Shares of Jinko Solar (JKS, $18.27), Renesola (SOL, $5.48), Trina Solar (TSL, $10.23),
and Yingli Green Energy ($4.69)
have all broken out to new highs in the past two trading days on heavy volume, gaining between 8% and 15% just today!
Why? For one thing, there are very few places left to find value and these companies seem to be one of them. The main reason is that Asian demand for solar panels is exploding. In 2013 alone, Japan and China will account for 40% - 50% of global solar panel consumption and these companies are best positioned to benefit from this surge in demand. Another (and very important) reason is that they all make silicon panels that are much cheaper to produce unlike First Solar's (FSLR)
Cadmium Tellurium panels that (so far) have been funded by the US government. But as these government subsidized projects wind down, expect First Solar's profits to wind down with them. (In fact, First Solar could make a very good short candidate--watch for a break below the $35 support level for an entry point.) Margins for all of these Chinese companies have been rapidly increasing as factories are gearing up to operate at full capacity.
So how long can we expect these solar companies to shine? According to one analyst quoted in this recent Bloomberg article
: Growing shipments and increased margins could drive additional positive earnings momentum as well as share price strength in the near term, noting that more large Chinese solar companies will report profits within the next two to three quarters. I say, shine on! 1:35 pm ET: Intraday support/resistance:
Trin range: 0.55 - 0.7 (Trin getting into contrarian territory)
Average VWAPs: +31/-91 (bearish) August 30, 2013 1:35 pm ET: Intraday support/resistance:
VIX 16.7/17.8 (rising VIX is bearish)
Trin range: 0.55 - 1.0
Average VWAPs: +22/-58 (bearish, but trading is on very light volume) August 29, 2013 2:00 pm ET: Intraday support/resistance:
Trin range: 0.6 - 0.9
Average VWAPs: +38/-50 (bull/bear seesaw) August 28, 2013 2:10 pm ET: Intraday support/resistance:
Trin range: 0.6 - 1.0
Average VWAPs: +65/-36 (bulls fighting back) August 27, 2013 2:00 pm ET: Intraday support/resistance:
VIX 15.8/16.8 (rising VIX is bearish)
Trin range: 0.8 - 1.3 (rising Trin is bearish)
Average VWAPs: +30/-92 (bears now in control) August 26, 2013 1:50 pm ET: Intraday support/resistance:
Trin range: 0.65 - 0.95
Average VWAPs: +47/-43 (bull/bear tug of war still going on) August 23, 2013 2:05 pm ET: Intraday support/resistance:
VIX 14.05/14.8 (falling VIX is bullish)
Trin range: 0.55 - 0.8 (falling Trin is bullish)
Average VWAPs: +52/-44 (bulls desperately trying to stay in the driver's seat) August 22, 2013 2:10 pm ET: Intraday support/resistance:
VIX 14.55/15.25 (falling VIX is bullish)
Trin range: 0.8 - 1.1 (falling Trin is bullish)
Average VWAPs: +61/-39 (bulls on the top of the seesaw--for now) August 21, 2013 2:20 pm ET: Intraday support/resistance:
VIX 15.45/15.55 (rising VIX is bearish)
Trin range: 0.75 - 1.55 (rising Trin is bearish)
Average VWAPs: +39/-51 (bears trying to take charge) August 20, 2013 2:10 pm ET: Intraday support/resistance:
VIX 14.05/15.25 (falling VIX is bullish)
Trin range: 0.75 - 1.25 (falling Trin is bullish)
Average VWAPs: +80/-25 (market seesaw swinging in favor of the bulls) August 19, 2013 1:15 pm ET: Intraday support/resistance:
Trin range: 0.95 - 1.35 (neutral to bearish)
Average VWAPs: +40/-62 (bears barely edging out the bulls) August 16, 2013 Subscriber Notes:
There are no new entries. 2:10 pm ET: Intraday support/resistance:
VIX 13.6/15 (rising VIX is bearish)
Trin range: 0.75 - 1.25 (rising Trin is bearish)
Average VWAPs: +40/-73 (bears gaining the upper hand) August 15, 2013 Subscriber Notes:
There is one new Stock of the Day and one new Channeling Stock. 1:50 pm ET: Intraday support/resistance:
VIX 13.75/14.85 (rising VIX is bearish)
Trin range: 0.6 - 1.0 (surprisingly bullish to neutral)
Average VWAPs: +68/-60 (bears trying to take control but bulls won't go quietly) August 14. 2013 Market Notes
: As predicted yesterday in my notes to my Blue Plate Specials subscribers, we are seeing that any rally attempt is being slapped down by the bears. The market leading Dow Transport Index (DTX) is desperately trying to hang onto 640 support but with today's VIX close above 13, I fear that this level ain't gonna hold for too much longer. The bears will be able to claim victory only when the VIX moves back over 15 (the bull/bear dividing line). So when may that happen? My guess is that it will occur roughly around the time when the DTX closes under 630 and the SPX closes below 1675--areas of major support for both indices.
Right now, there's just not a lot to love out there. Today, Apple stock (AAPL)
saw some follow through from yesterday's massive buying spree but buying action petered out towards the end of the day forcing a close below the $500 mark. This is a fairly strong resistance level and as I said yesterday, I would wait for it to close above it before initiating a long position. Subscriber Notes:
There are no new entries. Go to the beach! 2:00 pm ET: Intraday support/resistance:
VIX 12.35/12.95 (rising VIX is bearish but still in bullish territory
Trin range: 0.65 - 0.9 (bullish)
Average VWAPs: +39/-57 (bull/bear see-saw with bears getting the edge) August 13, 2013 1:20 pm ET: Intraday support/resistance:
VIX 12.15/13.35 (falling VIX is bullish but getting into contrarian territory)
Trin range: 0.65 - 0.95 (bullish)
Average VWAPs: +96/-35 (bullish) August 12, 2013 1:20 pm ET: Intraday support/resistance:
Trin range: 0.65 - 1.0
Average VWAPs: +59/-47 (bulls and bears on a see-saw) August 9, 2013 1:45 pm ET: Intraday support/resistance:
Trin range: 0.65 - 1.0
Average VWAPs: +67/-47 (bull/bear battle) August 8, 2013 2:25 pm ET: Intraday support/resistance:
VIX 12.3/13.1 (falling VIX is bullish)
Trin range: 0.65 - 1.2 (falling Trin is bullish)
Average VWAPs: +87/-49 (bulls on top--for now) August 7, 2013 1:45 pm ET: Intraday support/resistance:
VIX 12.9/12.9 (VIX up but falling fast-->bulls stepping in)
Trin range: 0.8 - 1.2 (neutral)
Average VWAPs: +59/-55 (bull/bear seesaw continuing) August 6, 2013 2:20pm: Market Notes
If much better than expected European manufacturing numbers (Germany & Great Britain) along with a US trade deficit narrowing by a wide margin can't boost this market, what can? Yesterday, the VIX closed well into contrarian territory so traders shouldn't have been surprised by today's early morning sell-off. The rise in both the VIX and the Trin are pointing to further downside. This notion is supported by the market-leading Dow Transport Index (DTX) which is gaining downward momentum. All sectors are trading in the red. Yesterday, the Advance/Decline line put in a double top which is a very bearish sign. The last top was on May 20th and the market sold off for a month after that. We've been noting for a while that valuations have been getting lofty and I do think the market is ready to follow the traders by taking its own vacation. See 'ya bulls in a month or so--for now, the bears are taking over the picnic. Grrr!
Note: I will be limiting my intraday market notes to just that while I finish my Stock Market Cook Book. To keep up with many of my intraday market observations including what's hot and what's not, please follow me on Twitter (@StockMarketCB), SeekingAlpha Stock Talks (Dr. Kris), or on StockTwits (DrKris). Just to reiterate to my subscribers, I WILL be doing the work on the daily *Blue Plate Specials* as usual, so please don't worry! Subscriber Notes:
There is a new Stock of the Day. 1:30 pm ET: Intraday support/resistance:
DTX 649.25/660.75 (falling DTX is bearish)
VIX 12.05/12.95 (rising VIX is bearish)
Trin range: 0.9 - 1.25 (rising Trin is bearish)
Average VWAPs: +62/-53 (bull/bear seesaw continues) August 5, 2013 1:10 pm ET: Intraday support/resistance:
DTX 659/664.5 (falling DTX is bearish)
VIX 11.95/12.45 (VIX firmly in contrarian territory--beware!)
Trin range: 0.65 - 0.95 (moderately bullish)
Average VWAPs: +47/-53 (bull/bear seesaw--who will eventually win?) August 2, 2013 2:10 pm ET: Intraday support/resistance:
VIX 12/12.75 (VIX firmly in contrarian territory--beware!)
Trin range: 0.65 - 0.9 (moderately bullish)
Average VWAPs: +79/-50 (moderately bullish but bears still hanging around) August 1, 2013
Wowie kabowie! Not only did the bulls manage to quash yesterday's bear charge but they did so with a vengeance. Finally, FINALLY!, the S&P 500 was able to close over 1700, a level that seemed almost unattainable. Leading today's charge was the Dow Transport Index (DTX) which crushed overhead resistance at 660 and ended the day up a whopping 3.2%. Doing an eyeball scan on its daily chart, it looks like this was its best day since early 2012. While the VIX is low, there is more downside possible giving the green light to a rally continuation. The only internal that hasn't been fully cooperating is the negative VWAPs which, considering today's hugely bullish tone, were remarkably high. This indicates institutional selling pressure--maybe they're smelling that we're close to a market top and are starting to book some profits? I'm not sure what the reason is here unless they're dumping their losers and reinvesting the proceeds into more viable areas such as financials, insurance, and tech. It will be interesting to see how the market reacts to tomorrow's non-farm payroll figures due out before the open and if today's preliminary claims numbers will be corroborated by tomorrow's data. Market Highlights: Market mishigas
So much happened today that deserves a longer write-up but I'm trying to free up my time to finish a book, so here's today's action in a nutshell:
1. Dollar was up against all other currencies as bonds continue to sink.
2. Europe and China country funds breaking out. (Check out Italy (EWI), Belgium (EWK), France (EWQ), Hong Kong (EWH), and China Bull 3x (YINN).)
3. Sectors powering to new highs: Banks (KBE), Industrials (XLI), Insurance (KIE--still undervalued), Consumer Discretionary (XLY), Retail (XRT, RTH), IT (VGT), Transports (IYT)
4. Soft commodities continue to slide to new lows: Ag (JJA), Grains (GRU), Corn (CORN), Coffee (JO)
5. Stock Standouts (from the new highs list): Insurers--Lincoln National (LNC, $44, +6.6%), Metlife (MET, $51, +6.3%), Stancorp Financial (SFG, $56, +4.9%), Prudential (PRU, $83, +4.6%)
Of these, Stancorp not only is sporting a very bullish chart (though it is looking a bit overextended) it also has a relatively low P/E of 13.
Internet stocks zoomed on better than expected earnings from Yelp (YELP, $52)
which popped 23% (three analyst upgrades helped) and from Trulia (TRLA, $45)
which also jumped by nearly 20%. LinkedIn (LNKD)
just reported some good news causing the stock to pop in after hours trading today. Subscriber Notes:
There are no new entries but please do read today's email concerning how to play the next leg up in this rally. 2:10 pm ET: Intraday support/resistance:
VIX 12.65/13.25 (falling VIX is bullish)
Trin range: 0.6 - 0.8 (bullish)
Average VWAPs: +104/-54 (very bullish but bears still hanging around) July 31, 2013
Even better than expected GDP numbers and picture-perfect rhetoric out of the Fed couldn't keep the bears from spoiling the bulls' picnic. The first clue that the bulls might be in trouble was the drop in all of the major averages after the opening rally. The second clue was the drop after the Fed interest rate decision and news release saying pretty much exactly what Wall Street wanted to hear: they will begin tapering their bond buying program at some indeterminate time in the future but they won't be raising interest rates anytime soon. If good news can't keep the bears away, imagine the havoc a disappointing jobs number on Friday could wreak. The fact that the S&P cannot make it past 1700 is a sign that the market is tired and may be poised for a sell-off. Judging by the strength of the late-day bear charge, I'd say a correction could begin as early as tomorrow.
Note: My blogs are going to be shorter for the next few weeks as I'm trying to block off some time to finish a book. I figured this would be a good time as many people are on vacation. If you're a subscriber, please don't worry. I will be keeping up the Subscriber Services as usual. Subscriber Notes:
There is one new Channeling Stock. 2:30 pm ET: Intraday support/resistance:
VIX 13.05/13.85 (falling VIX is bullish)
Trin range: 0.7 - 1.15 (neutral)
Average VWAPs: +94/-45 (bullish but bears still hanging around) July 30, 2013
The dog days of summer are here as Wall Street waits on upcoming key economic numbers (GDP & Fed interest rate/minutes tomorrow; non-farm payroll on Friday). The Dow Transport Index (DTX) has been rangebound for the past two weeks with the 640 level providing strong support and 660 providing overhead resistance. A break in either of these levels would be a fairly strong indication of mid-term market direction. Market Highlights: Chinese small fry sizzle
Just when you thought the China play was over, in comes some small caps to shake things up. Four stocks (all trading on US exchanges) have been making major blips on my radar screen and I thought we'd take a quick look at each of them.
First off is China Recycling (CREG, $2.61)
, a developer of waste energy recycling projects for industrial applications in China. Share price has zoomed from a buck in late June to yesterday's high of $2.80. Volume since then has soared and it's a little bewildering as to why. Analysts quoted by the New York Post are giving the company a Hold rating citing weak operating cash flow, disappointing return on equity (ROE), and poor profit margins. Perhaps others know something I don't or perhaps there's some stock manipulation--I just can't tell. There is very little news on this company and I'd be wary about taking a long position, especially at these levels.
Next up is China Cord Blood Corp (CO, $4.19)
which is the largest cord blood bank operator in China, with exclusive licenses to operate in Beijing Municipality and Guangdong Province. [A cord blood bank is a facility that stores umbilical cord blood for future use.] Trading in this stock was quiet until July 9th when all heck broke loose and the stock started jumping. Today it broke $3.80 near-term resistance in an 11% move. If you'd like to read more on this company, please check out this article
The third is Chinese mobile game developer KongZhong (KONG, $8.69)
. The stock made its US debut in 2004 and since then it's been a roller-coaster ride for investors with share price bouncing between $2 and $16. Currently, the stock is on its way back up as it shifts its business model from 2G entertainment to 3G mobile and online gaming. The stock has gained over 35% in the past three weeks on much heavier than normal volume. The company reports earnings on August 19th. For further insight into this company and its financial metrics, please read this article
The last (but not least) candidate in today's lineup is E-Commerce China Dangdang (DANG, $9.51)
. DANG started its e-commerce business selling books. Taking a page from Amazon's business model, it expanded its offerings into other areas with the inclusion of third party vendors. Although DANG is still small potatoes in the Chinese e-commerce sphere (Tmall is the largest), it's gaining market share. Though still a couple of years away from posting a profit, analysts see revenue climbing 26% and its deficit narrowing when it reports in two weeks. Share price has risen 150% since May on two to three times normal volume. Here's one article
you can use to begin your research if you're interested in learning more about this company.
In all of these stocks, volume has risen sharply indicating that institutions are buying. Because of their relatively low share prices, you may be tempted to think that these are pump and dump schemes but the consistently high volume on all except for China Cord Blood (volume is just starting to pick up so it's too soon to tell) indicate otherwise (although I'm a bit suspicious of CREG). Also, people are shying away from Chinese stocks because of their lack of transparency (I'm being diplomatic here). I do think, though, that it is unfair to assume that every company is shady because you might be overlooking some excellent finds. Sure, all of these stocks have run-up very quickly and as such are ripe for a sharp pull-back. But there could be some excellent long-term growth potential to be had at a small price and I do believe that these companies deserve closer scrutiny by the serious investor. Subscriber Notes:
In light of the important upcoming economic events (Fed & GDP tomorrow; unemployment on Friday), I'm loathe to make any long recommendations until we see which way the wind will be blowing. 2:15 pm ET: Intraday support/resistance:
VIX 13.35/14.15 (rising VIX is bearish)
Trin range: 0.8 - 1.1 (neutral)
Average VWAPs: +49/-76 (bull/bear battle with bears having the edge at the moment) July 29, 2013
With key economic figures coming out later this week, the major averages have been luffing on light volume. Today was a bull/bear seesaw ride with the bears having the slight upper hand. It appeared as if the market leading Dow Transport Index (DTX) was on track to close beneath 640 but either last minute (and I do mean last minute) short-covering and/or program trading reversed the downward slide sending it back above this support level. Whew! The bulls get to reign for one more day.
But is their dominance waning? Technically, it sure appears that way and as we've been saying, the market is already fairly valued at these levels. In fact, it's not easy to find sectors that are trading at a discount. Some banks and insurers are still attractively priced but their futures are tied to interest rates and the strength of the consumer. We should learn more about the status of interest rates in the Fed's rate decision and their minutes due out mid-day Wednesday. Unemployment has a direct impact on consumer spending and we'll know more about that when Friday's non-farm payroll figures are released. This week's market action will likely be a direct reflection of the reaction to these figures (the GDP number also coming out Wednesday will be closely watched as well) and we could see a lot of action in the volatility index (VIX) as a result. This week may be the week that decides the tone of the market for the rest of the summer. Market Highlights: The short squeeze in uranium miners continues
The short squeeze in the two uranium miners USEC (USU)
and Uranium Res (URRE)
, noted here on Friday, continued today with USU exploding by over 50% to $29 and URRE leaping by 28% to $5.32. Compare these figures with the 3.4% drop in industry biggie Cameco (CCJ)
and you can see that the short squeeze thesis is probably based a lot more in fact than in hypothesis. Despite Cameco's slump, the uranium etf (URA)
still was able to hurdle its $19 resistance level. (Cameco comprises 21% of the URA.) If the URA can continue to move higher, now may be a good time to start building a position in nuclear energy. Is Johnson & Johnson getting overheated?
I'm starting to flag stocks that are trading either far above or far below their moving averages (I look at the 21, 50, 100, and 200 day moving averages) and noted that Johnson & Johnson (JNJ, $93)
for one is getting into heady territory. In many dynamic systems it's regarded as a general fact that when a system strays too far in either direction, there is a tendency for it to move back in the other direction. This is known as a reversion to the mean and is something that traders and investors can use to tell if their stocks are becoming overbought or oversold.
Many stocks have been putting in new highs on a regular basis and many are starting to trade way above their moving averages. As mentioned, Johnson & Johnson is trading at an all-time high. With a P/E of 20, it's not overvalued but at 40% above its 50 day moving average (dma for short) it may be time to book profits or at least protect a long position. Today's put/call ratio on JNJ was 2:1 indicating that either the bulls are putting on protection and/or the bears are taking a stance. Either way, both the stock chart and the options market is flashing red on this one, so please take note. Subscriber Notes:
There are no new entries. 2:00 pm ET: Intraday support/resistance:
VIX 13.4/13.9 (rising VIX is bearish)
Trin range: 0.65 - 0.9 (falling Trin is bullish)
Average VWAPs: +45/-50 (bull/bear battle) July 26, 2013
The bears tried to make a stand early this morning but the bulls came charging back with a vengeance pushing all of the major averages into the green. At the helm was the Dow Transport Index (DTX) and that bodes well for a follow-through rally on Monday. The VIX obediently turned back down, closing under 13. It's back in contrarian territory and as I said yesterday, the bulls may not be in the driver's seat for much longer. Investors should strongly consider taking profits while the going is still good and long-term investors may wish to protect core holdings with options puts especially since they're so cheap. Market Highlights: Short-squeeze in the uranium miners
The biggest action seen today was in the junior uranium mining and exploration companies with USEC (USU) and Uranium Res (URRE)
jumping 37% and 35% respectively. The move in USEC began in early July right after the company executed a 1:25 reverse stock split. That and the fact that Japan is scheduled to open ten nuclear power plants in the near future could have been the catalyst. Just before the reverse split, short interest for USEC was a whopping 69%. The last reported short interest figure I could find for URRE was on 7/15, placing it at 32%, just a few days before that stock popped, too. Smelling fresh blood, the fast money piled in fueling the flames even more in both issues.
In reading some of the stock message boards, I'm seeing people who are tempted to join the fray, but this could prove to be a very dangerous move. It's tough to predict when the shorts have all been covered particularly as new short positions are being initiated on the assumption that the short supply is close to drying up and there are no more buyers to be had. Eventually this will prove to be true but trying to time it is the tricky part and I wouldn't advise it unless you're playing with a lot of money you can afford to lose.
A better question to ask is what is the outlook on uranium stocks? Contrary to popular belief following the meltdown in Japan, nuclear power plants are NOT going off the grid; in fact, many countries including Japan, Russia, and Germany (who had said that it would rather explore other options) are opting for nuclear especially as other forms of electricity are becoming either too costly or too environmentally unfriendly. Emerging markets such as China, India, and South Korea are aggressively building reactors and even oil giant Saudi Arabia has plans to build 16 of them. Environmentalists who in past have denounced nuclear as being environmentally unfriendly have done a 180 degree about face as films like Pandora's Promise
show that the new design in nuclear is much cleaner and safer than in the past.
Right now uranium prices are low and even with all of the new power plants scheduled to go online in the next few years (60 under current construction with 150 more planned), there's enough of an oversupply to keep the price depressed with some analysts projecting price stagnation until 2016. But right now could be the time for the patient investor to slowly begin building a long position. By far the largest player in the space is Cameco (CCJ, $21)
with a market cap of $8B. Like the metal, Cameco's stock has been stagnant but is showing some signs of revival. A break above $23 could be the first entry point, and a break above $25 would give extra legs to the rally and would be the next entry point. For those who want broader exposure, the Global X Uranium ETF (URA, $18.83)
is a basket of uranium stocks, though Cameco is its largest holding at 21%. Both Cameco and the Uranium ETF pay dividends yielding just under 2%. Subscriber Notes:
There is one new Channeling Stock that is currently testing its upper channel bound. 2:00 pm ET: Intraday support/resistance:
Trin range: 0.8 - 1.2
Average VWAPs: +79/-42 (moderately bullish but bears are waiting to pounce) July 25, 2013
As predicted yesterday the market did put in a bottom but the question now is whether this is a real bottom or just a local one. With the VIX falling back below 13, I'm thinking that we'll get a few more up days--just enough so that the VIX retests the 12 level. Every time the VIX has neared this level, the market has dropped, and that's the scenario I'm expecting. But like most things in life, just because one expects something to happen doesn't mean it will.
Today is a shortened blog day. Dr. Kris is a bit under the weather and will be spending the rest of the day in bed trying to recuperate. Hope to back in the swing of things tomorrow! Subscriber Notes:
There is one new Stock Darling. 2:10 pm ET: Intraday support/resistance:
Trin range: 0.65 - 0.9
Average VWAPs: +100/-42 (bullish but bears are still hanging around) July 24, 2013
Just as predicted yesterday, the euphoria surrounding Apple's better than expected earnings report boosted the major averages on the open but it was all downhill after that. The Dow Transport Index (DTX) continues to lead the market down while the VIX continues to notch higher--both bearish signs. The good news is that the VIX is still in bullish territory meaning that any correction could be short-lived. It's tough to know as the light volume accompanying the dog days of summer can amplify movements in either direction. We may see a temporary bottom tomorrow as today's end of day short covering is showing that the bears don't really want to be short longer than they have to. A rise in the VIX above 15 should be taken seriously and may be the signal that there's more downside in the cards. Today's Highlights: Is now the time to buy Apple?
Yes, yesterday's expected earnings figures out of Steve Jobs' legacy company were better than expected but the bar set was set so low so a beat wasn't much of a surprise. Revenues are showing signs of slowing and margins are decreasing. Sure, Apple reported record iPhone sales in the US but much of that was due to consumers preferring the older phones at lower prices. Internationally, a just out article by the Motley Fool is showing the Apple's international iPhone sales are rapidly declining. Also, sales of the iPad may be in trouble with Google today announcing its new Nexus 7 windows tablet that is not only supposed to be more powerful than the iPad but it's also $100 cheaper. Ouch! That's definitely not going to help Apple's bottom line. With no innovative product offerings set to be unveiled (yes, they are working on a watch but so is everyone else), I don't think today's pop is a signal to jump in. The stock would have to fill the gap at $483--about 10% above today's close--before I'd consider taking a long position. Subscriber Notes:
There are no new entries but I'm looking at a couple of potential shorts if the market keeps moving lower. 2:30 pm ET: Intraday support/resistance:
VIX 12.7/13.8 (rising VIX is bearish)
Trin range: 0.75 - 1.15 (neutral)
Average VWAPs: +41/-91 (bearish) July 23, 2013
We've been saying that the market has been looking toppy lately and today's plunge in both the market-leading Dow Transport Index (DTX) combined with the continuing fall in the VIX to 12--an extremely contrarian level--is telling us that a correction is imminent. That being said, the fact that Apple (AAPL) beat earnings estimates (which were low-balled to begin with) could bolster the market tomorrow morning but I think the early morning euphoria will wear away quickly as the bears step in. Today's Market Highlights: More of the same
Today's action was pretty much a continuation of yesterday's moves. Gold bugs should be happy to see the follow-through in yesterday's break-out rally. Even Dennis Gartman came out saying that this is the first time in five years he's bullish on gold and he's recommending buying the gold miners (GDX, GDXJ) over the metal itself (GLD, IAU). The reason is that during the beginning of gold rallies, the miners tend to take the early lead along with offering better returns. (The downside is that they are more volatile.)
The so-called soft commodities can't seem to catch a break. Today the Corn etf (CORN)
and the Grains etf (GRU)
both slumped to new yearly lows. Neither one shows any signs of basing but they're worth keeping an eye on because when they do turn around, they can do so with a vengeance. If you're on your toes, these commodities can make you a lot of money in a very short period of time. Stock Stand-out: Lockheed-Martin takes flight
Pentagon budget cuts arising from sequestration haven't done much to hamper the aerospace and defense industry. The aerospace and defense etf (PPA)
continues to rally. Today it made another new high helped in part by the 2% jump in the stock of industry giant and the nation's number one defense contractor Lockheed-Martin (LMT, $118)
. The stock has been on the comeback trail ever since its March low of $86. Since then, it's rallied 37% to close the day near $118. In today's earnings announcement, the company raised third quarter guidance giving the stock a reason to pop. It just won a contract to provide defense weather satellites which is good news but is nothing compared with the F-35 fighter program which is the company's bread-and-butter. Many have worried that sequestration could force program cut-backs but Pentagon officials have been quoted as saying they consider the F-35 to be a top priority and so far there have been no funding cuts.
With a P/E of only 13, Lockheed-Martin is undervalued compared with the rest of the industry group. The company's workforce was reduced in anticipation of sequestration and so far, it's been working. Four analysts rate this company a Strong Buy with twelve rating it a Hold. What this means is if the company can continue to execute its business model, many of the Holds will likely be raised to Buys. The company pays a dividend, currently yielding almost 4%. It's thisclose to testing its all-time high at $120 and a break through that could send it, well, soaring. Subscriber Notes:
There is one new Stock of the Day. 2:00 pm ET: Intraday support/resistance:
VIX 12.05/13.25 (VIX firmly in contrarian land--this could be a market top)
Trin range: 0.85 - 1.2 (rising Trin is bearish)
Average VWAPs: +52/-58 (bull/bear battle continues) July 22, 2013
Mr. Market is still riding high but it does appear as if this balloon is beginning to run out of helium. Today's lack of leadership in the transports is the first giveaway and the fall in the VIX to the low 12's is sending it firmly into contrarian territory. I'm not sure what else is left to bolster this rally unless we get a spate of much better than expected earnings reports. Apple's earnings, due out after the close tomorrow, will likely set the tone for Wednesday's market action. Since options are so cheap, you gamblers may wish to put on a straddle on either Apple or an index tracking stock ahead of the event. Today's Market Highlights: Banks, Bonds, & Bullion
Market rotation continues on the expectation of a rising interest rate environment. Muni bond funds continue to sink while regional bank stocks--especially those that are still undervalued--continue to rise. Of the forty issues hitting the new yearly low list today, thirty-eight of them were muni bond funds. Most of these funds shed 1-2% just today and appear to be heading lower. On the upside, the following regional banks broke out to new highs, many on heavier than normal volume (Symbol, Stock price, dividend yield): Pacific Premier (PPBI, $13.7, No dividend), Fifth-third Bancorp (FITB, $19.34, 2.5%), Banco LatinoAmerican (BLX, $26.14, 4.6%), Keycorp (KEY, $12.37, 1.8%)
, and Cobiz Financial (COBZ, $10.23, 1.2%)
. All of these are showing technical strength and sport relatively low P/E's in the 10 to 16 range. If you're interested in building or adding to a position in the regional banks, all of these merit further investigation.
Gold bugs have been dropping like, well, flies since the precious metal began its 33% slide from its October high. However, both gold and silver have been finding support and today they staged what is known in technical terms as an island reversal . In this case, the reversal is very bullish and we should expect gold to advance from here. While today's 3% gain in the gold etf (GLD)
was impressive, that was nothing compared to the jump in the gold miner etf (GDX, $27)
and the junior gold miner etf (GDXJ, $43)
which added 6% and 8% respectively on to Friday's closing values. While gold dropped 33% from its peak value, that was nothing compared to the 60-70% loss in the miners.
A gain in gold will likely be amplified in the miners and this is the group in to which I'd rather place my bets. The next technical test on the GDX is to see if it can fill the gap between $30.50 and $32.50. If so, that's a signal to add to your position. For right now, though, I'd begin by taking a partial position, say about a quarter to a third, then adding to it when it passes these technical tests. You high rollers out there may wish to look at the triple-levered gold miner etf (NUGT, $7.8)
. Note that while returns on these leveraged funds are greater, they do come with heightened risk so please know what you're getting into before placing a trade. That's why they come with prospectuses--read them! Subscriber Notes:
Our intrepid web programmer was able to restore the contents of the Stock of the Day writeups and we are in the process of making sure this will never happen again. There are no new entries today. 1:20 pm ET: Intraday support/resistance:
VIX 12.55/13.35 (VIX entering bullish contrarian territory--are we close to a top?)
Trin range: 0.65 - 1.0 (falling Trin is bullish)
Average VWAPs: +52/-50 (bull/bear battle) July 19, 2013 [Weekend edition]
We've been experiencing technical difficulties with our server and so this weekend edition of the blog will be very brief.
Rather than leave the blog until Monday, I felt it was necessary to inform my readers that the market is looking quite toppy, both technically and fundamentally. In Thursday's blog we touched on why the market may already by overvalued. Friday's action showed that we may, indeed, be nearing a top for the following reasons.
The first is that the sharp drop in volatility (-9%) brought the VIX into bullish contrarian territory (around 12.5 and below is contrarian). Every time the VIX has hit this level, the market has pulled back. Sure, the VIX can hang here for a while even as the market continues to rise, but it probably won't be too long before it corrects.
If you'd rather be safe than sorry, you might wish to consider taking profits especially on those stocks that have run-up a lot. As previously mentioned, you can still play the upside by buying call options or bull call debit spreads (to lower your entry cost even further) as options are now extremely cheap.
That's all for now. See you kids back here manana! Subscriber Notes:
There is one new Stock Darling. 2:30 pm ET: Intraday support/resistance:
VIX 12.6/14 (VIX entering bullish contrarian territory--are we close to a top?)
Trin range: 0.9 - 1.25 (neutral)
Average VWAPs: +76/-39 (mildly bullish but bears are hanging around) July 18, 2013
Woo-hoo! The bulls took control today as the market-leading Dow Transport Index (DTX) zoomed up over 1.6% to a new all-time high. Not only that, but the Dow Industrial Index (DJIA) finally managed to blow through 15500, a level that has been a major source of overhead resistance for the past week. Not only did gentle Ben's soothing words comfort Congress as well as Wall Street, but the fact that second quarter earnings growth is on track to expand by 4-5% helped fan the rally's flames.
Taking the lead today were the financials (XLF) and banks (KBE, KRE) all of which continue to inch to new highs. One of the few industry groups not invited to today's love-fest was the semiconductors (SMH, SOXX)
which dragged on both the technology sector (XLK)
and the tech-heavy Nasdaq. Is the market overvalued or undervalued?
The question now is whether the next leg up in this rally has staying power. To determine that, we need to update our valuation metrics. Historical measures of the Price to Earnings (P/E) ratio on the S&P500 (SPX) are 15.5 as the median value and 14.5 as the mean value. These figures are based on trailing twelve month earnings
. Assuming a trailing earnings scheme, the current P/E for the SPX is 19.53 (see this source
). If we are to assume this metric, then the market is already overvalued.
However, if we apply a forward P/E we will get a different result. This source
gives the current forward P/E on the S&P as 14.3, clearly undervalued. The source also cites 117.8 as the current forward earnings number
on the SPX. Using this value and applying the above median and mean historical P/E values (which may not be the correct thing to do) gives target values of 1708 and 1826 respectively. Depending on your point of view (and not being an economist I don't have one), the market is either overvalued at current levels or undervalued by as much as 8%.
If you're as uncertain as I am, one way to play this is to cash out of long positions (either fully or partially) and replace them with options. This will raise cash but will also keep you in the game. Since volatility is very low, options are cheap--another bonus. Just my two cents. Subscriber Notes:
There is one new Channeling Stock. 2:00 pm ET: Intraday support/resistance:
VIX 13.2/13.8 (falling VIX is bullish)
Trin range: 0.85 - 1.4 (neutral)
Average VWAPs: +58/-52 (bull/bear tug of war) July 17, 2013
The expected volatility accompanying Bernanke's grilling by Congress didn't occur. Instead, the market continued to digest recent gains with both the bulls and the bears vying for the upper hand. Sooner or later, the market has to make up its mind and we could see a move by the weekend. I mean, how many times can the Dow continue to test the 15500 level? (Today marks the fifth day in a row!)
The highlight in today's market wasn't really in the market but on TV. Specifically, the showcase interviews at CNBC's Delivering Alpha conference that's now taking place in New York. The first interesting interview was from hedge fund giant John Paulson who correctly predicted the subprime mortgage crisis and made a gajillion dollars by taking the short side. Now, however, he's completely reversed his position and said that real estate is the
place to be. He said that if you don't own a house, buy one, and if you already own one, buy another. He's long the triple-A mortgage tranches (the opposite of subprime) as well as owning actual real estate. But if you can't afford to buy a house and want to get in on the action, consider mortgage lending banks such as Bank of America (BAC)
(which broke out to a new high today on a huge profit report) and Wells Fargo (WFC)
. Other areas include mortgage insurers such as Radian (RDN)
and Genworth Financial (GNW)
. Also mentioned was mega real estate service provider Realogy (RLGY)
whose holdings include Century 21, Coldwell Banker, and Sotheby's International.
As informative as Paulson's interview was, it couldn't hold a candle entertainment-wise to this afternoon's interview with activist billionaire investor Carl Icahn. (I was glued to the TV watching it which is why today's blog is a little late.) Always the colorful character, his interview is well worth watching and hopefully CNBC will post it on their website soon. He didn't offer too many actionable stock tips except that he's continuing to hold his extensive long positions in Netflix (NFLX)
and Herbalife (HLF)
for what that's worth. When asked about the status of the Dell deal he said that he couldn't comment on it as the situation is still unfolding. He did say, though, that the Dell board is essentially a bunch of idiots. Carl Icahn is one person you either love or hate but one thing is for sure--he's rarely dull. Subscriber Notes:
There is one new Stock of the Day. 1:50 pm ET: Intraday support/resistance:
VIX 13.65/14.45 (falling VIX is bullish)
Trin range: 0.85 - 1.2 (falling Trin is bullish)
Average VWAPs: +53/-47 (bull/bear tug of war) July 16, 2013
Following the recent rally, it was no surprise that the market took the day off to digest recent gains. The bearish engulfing bar on the daily candlestick chart of the market leading Dow Transport Index (DTX) along with a rapidly rising VIX suggests further downside is in the cards. Volatility could be the name of the game tomorrow as Fed chair Ben Bernanke takes the stand in front of Congress. The chairman's speech (if you have problems falling asleep, tape this) will not be the source of volatility--that usually comes during the Q&A session that follows. (I like to watch this part especially just to see who can ask the dumbest question.) Today's Market Highlights: More money flowing into regional banks
Today's jump in the consumer price index (CPI) flamed inflation fears prompting some folks to urge the Fed to begin its bond tapering program as soon as possible. The news added more fuel to the rally in regional banks who stand to profit from a rising interest rate environment. Two smaller banks have been showing up on my radar screen and I'm mentioning them purely on the technical strength of their stock charts.
The first is First Bancorp (FBP, $8.19)
. This bank is based in Puerto Rico and operates there as well as throughout the Virgin islands. The company reported negative earnings in May, widely missing analysts consensus forecast. However, next quarter's earnings are expected to be positive and growth is projected to accelerate over the next couple of years. Although the stock has risen steadily off its low of $3.20 in a little over a year, it's still way below its 2004 all-time high of $490 as well as its 2007 pre-crash level of $200.
The second is Intervest Bancshares (IBCA, $7.37)
. Intervest provides internet banking services on the internet as well as mortgage loans. The company reported earnings earlier today and beat estimates by one penny ($0.11 vs $0.10). The news helped the stock advance to a new yearly high. Compared with a year ago, the stock has more than doubled and its chart is showing no signs of tiring out. Along with most of the other regional bank stocks which got burned during the 2008 mortgage crisis, Intervest is well off its pre-crash high of $48. Neither one of these banks currently pays a dividend. Subscriber Notes:
There are no new entries. There are several stocks on my radar screen but I'm loathe to recommend them because they appear to be fully valued. I'm also hesitant to make any buy recommendations as I do think the market in general is getting to be a little overheated. 2:45 pm ET: Intraday support/resistance:
VIX 13.6/14.5 (rising VIX is bearish)
Trin range: 0.7 - 1.4 (rising Trin is bearish)
Average VWAPs: +36/-66 (bears starting to get the upper hand) July 15, 2013
The market closed in the green yet again. For the S&P, today marks the tenth straight day of gains, but them's small potatoes compared with the gains notched by the tech heavy Nasdaq and the small-cap Russell 2000. The index that is starting to show some signs of fatigue is the mighty Dow which still hasn't been able to close over 15500 despite making five attempts at it. Market internals favor the bulls but the VWAPs are showing that the bears haven't gone on vacation just yet. As we've mentioned here before, the outcome of this earnings season will be a major factor in determining market direction for the remainder of the summer especially as many stocks are now trading at premium levels. To keep the bulls in business, we'll need to see continued leadership from the Transports and a low VIX (under 15). For right now, the prognosis is for more sunny skies over the bulls' camp. Today's market highlights: Solar flares
Although today's overall gains weren't particularly noteworthy, what did stand out was the breadth of the rally. Pretty much everything was trading in the green with the exception of non-white metals, muni bonds, oil drillers and producers, and some soft commodities (corn, grains, wheat, cotton). Yep, even the US dollar and treasuries moved up.
While today's rally was well attended, the true belles of the ball were the solar stocks with many of the more familiar names jumping by a whopping 10 to 20 percent. The reason behind the move was that the Chinese government came out saying that it was committed to building 35 GW (gigawatts) of solar infrastructure by 2015. They've been hinting at this for a while so it's somewhat of a mystery why today's announcement had such an effect unless investors don't put much faith into what the Chinese government says until it actually puts it in writing...
Anyway, the news caused both of the solar etfs to break out of strong resistance on heavier than normal volume. This type of move is regarded as being very bullish among market technicians. The Guggenheim Solar etf (TAN, $27.56)
and the Market Vector Solar etf (KWT, $54.46)
both jumped 8.5% and 6.7% respectively. Among individual issues, the biggest gainers were the Chinese companies: Hanwha Solar (HSOL, $3.17, +22%), LDK Solar (LDK, $1.75, +21.6%), Suntech Power (STP, $1.40, +21.2%)
, and Jinkosolar (JKS, $12.03, +18%)
. Also making a big gain was Canadian Solar (CSIQ, $13.93, +20.6%)
based on its strong presence in emerging markets including China and India.
So, how can you cash in on this jump in solar? Let's consider some facts. Although the Chinese issues are cheaper and are showing technical strength, the industry is heavily subsidized by the government making it more difficult for the investor to tell which company is healthy and which one isn't. Also, the talks between China and Europe regarding hefty import duties on non-European solar products are currently at a stand still. There are only 22 more days before the tariffs go into effect and if the situation can't be resolved, it won't be surprising to see a big drop in the share prices of some of these Chinese solar manufacturers. For that reason along with the fact that the solar space is, in general, more volatile than the rest of the market, I'd recommend taking a position in either of the above-mentioned etfs. These funds represent a basket of solar stocks making them less volatile than many of their constituents. The even better news is that they pay a dividend. Current yields are 5.15% for the TAN and 2.41% for the KWT.
The fact that oil energy costs are increasing along with rising environmental concerns globally make for a bright future in the alternative energy space and solar is poised to be a major player. It's how you play it, though, that will matter. Suggested further reading: Five reasons to buy solar stocks China won't let its solar industry fail SolarCity/Goldman Sachs deal highlights solar's investment appeal Subscriber Notes:
There are no new entries. 1:45 pm ET: Intraday support/resistance:
VIX 13.6/14.1 (VIX under 15 is bullish)
Trin range: 0.7 - 1.0 (neutral)
Average VWAPs: +56/-39 (bulls barely edging out the bears) July 12, 2013
The market ground higher again today with the S&P and the Russell 2000 closing at record highs. The low VIX is also giving the bulls something to cheer about. You'd think the bears would have gone back into hibernation by now but they're still making their presence know. Despite the rally in the S&P, Nasdaq, and the Russell 2000, today was a down day for the transports. Not that one down day is enough to spoil the party but add to that the fact that the Dow Industrial Index hasn't been able to close above 15500 and you can see why the bears are hanging around.
Valuations as well are beginning to get a little lofty. The historical mean P/E value on the S&P is 15.5 (the median is 14.5). The current P/E value stands at 19.4 meaning that this earnings season will be closely watched. If earnings come in lower than expected, a drop in the market will be the likely outcome. Trade Idea: Is your portfolio becoming overvalued?
We just noted above that the market is tilting towards the over-valued side. Now would be a good time to review your holdings to see if any of them are becoming too hot to handle. One way to know is to compare their valuation metrics against their peers. Different metrics are applied to different industry groups--just going by the P/E ratio is very often not an accurate reflection of a company's true health. For example, when considering biotechs and big pharma, you may wish to look at the robustness of their drug pipelines; in retail, same store sales and foot traffic growth are indications of how well the company is doing. Do your due diligence and find out what metrics are pertinent to your stocks. Then compare them against those of their industry peers. If you feel your company's stock price is getting rich, it would be wise to either lighten up your position or take out portfolio insurance (either by buying puts on individual stocks or puts on the index tracking stock that most reflects the make up of your portfolio).
Just a little weekend activity to balance out all the fun from backyard barbecuing and spending the day dozing on the beach. Subscriber Notes:
There are no new entries. 2:20 pm ET: Intraday support/resistance:
VIX 13.8/14.1 (VIX under 15 is bullish)
Trin range: 0.7 - 1.0 (neutral)
Average VWAPs: +62/-55 (bull/bear battle continues) July 11, 2013
Yee-ha! Helicopter Ben's dovish remarks earlier was just the Kool-Aid the bulls needed to spike the rally punchbowl. Ninety-nine percent of the market was up and all of the major averages, with the exception of the Dow Transports, hit new highs. Of those, the only one that didn't close at a new all-time high was Mr. Nazzie but today's jump on the open could signal it may not be long before it tests the 5000 level put in at the height of the dot-com bubble back in 2000.
As we've been noting, divergences in this market are becoming commonplace. Today, the name of the game was risk-off which, in general, is good for equities, commodities, and foreign markets but bad for the dollar and most bonds. Intermediate and long-term Treasuries saw gains of 1% or more which is a lot in the bond market. Maybe the current rise in longer-term bonds is starting to look attractive especially if everyone thinks that interest rates will remain low for the foreseeable future. Munis, corporate bonds (both investment grade and junk), and international bonds also rallied.
The two investment classes that weren't invited to the party were the ones that rely on a rising interest rate environment--the greenback and the regional banks, both of which have been recent outperformers. The regional banks especially fared the worst. For the past few months I've been touting them as a play on rising interest rates but if this rally does continue, then you may wish to consider lightening up your position. To get a clue as to when to begin exiting your position, look at the charts of regional bank etfs, the Ishares Regional Banks (IAT, $30.24)
and the SPDR Regional bank etf (KRE, $35.11)
. Both are testing new-term support at $30 and $35, respectively. If they do break below those levels, then you may wish to begin taking some money off the table.
However, today's rally could be short-lived as the volatility index (VIX) is now getting close to bullish contrarian levels. Currently, the VIX stands at 14. A drop below 12.5 has been the signal that market is ready to reverse course, a situation that has been in place since January. Remember, too, that Bernanke did not
say that the bond tapering program will be put off indefinitely. It still could start in September.
With that in mind, please choose your long positions carefully and be ready to take profits on a moment's notice. In this market full of contradictions, even the most seasoned market sailor is having trouble determining which way the wind is blowing. Subscriber Notes:
There is one new Channeling Stock. 2:00 pm ET: Intraday support/resistance:
VIX 13.7/14.2 (VIX under 15 is bullish)
Trin range: 0.7 - 1.25 (neutral)
Average VWAPs: +56/-55 (bulls & bears still battling it out) July 10, 2013
Irrational exuberance was the name of the game following the mid-day release of the minutes from the last FOMC meeting. The news caused a spike in the major averages with a corresponding drop in the VIX. But cooler heads prevailed as the situation quickly snapped back to pre-news levels. Most of the major averages ended the day either unchanged or up slightly except for the Dow Transport Index (DTX) which closed 5 points (0.7%) in the red. Add today's downward move to yesterday's topping tail and one might think that this could be the sign of further downside to come.
But think again. The market has been full of contradictions lately and today was no exception. On the bearish side, we have the larger-cap indices trading down or sideways. On the bullish side, the tech-heavy Nasdaq and the small-cap Russell 2000 continue to push higher. The VIX closed lower (bullish) but the Trin closed much higher (bearish) while the VWAP's (an indication of institutional buying and selling pressure) were all over the place. The best conclusion I can come up with is that there are strong opinions on both sides of the fence and until the bulls and the bears can find some common ground, these dog-summer days of divergences will continue. Let's hope the results of this earning season will be enough to settle the score. Today's market highlights: The Chips are up!
Someone or something lit a fire under the semiconductors today. I have no idea who or what is responsible but I'm sure many investors in this space are very grateful for whatever reason. Breaking out to new highs: AEHR (AEHR, $1.74, +14.5%), Global Tech (GAI, $12.24, +6.3%), ATMI (ATMI, $26.46, +5%), Advanced Energy Industries (AEIS, $20.46, +4.8%), Lam Research (LCRX, $49.52, +4.3%)
, and Applied Materials (AMAT, $16.30, +4.1%)
. Another stock that did not break out today but which has been steadily making new highs is Axcelis Technologies (ACLS, $1.96, +3.7%)
. All of these charts are in bullish uptrends and definitely merit further investigation. Subscriber Notes:
There is one new Stock of the Day. The write up will follow later today or tomorrow. In the meantime, please check out the subscriber services for preliminary info. 1:50 pm ET: Intraday support/resistance:
VIX 14.25/14.65 (VIX under 15 is bullish)
Trin range: 1.0 - 1.3 (rising Trin is bearish)
Average VWAPs: +53/-47 (bulls & bears wrestling for control) July 9, 2013
Speculation that billionaire activist investor Bill Ackerman is interested in possibly buying a chunk of FedEx (FDX) caused the stock to jump over 4% on nearly seven times normal volume. Since FedEx is a prominent component of the Dow Transports (as well as other indices), the push helped the index to not only break out of its downward trending channel but to punch through minor resistance at 640. The S&P (SPX) and the Nasdaq followed suit with both major averages breaking above recent resistance levels while the Russell 2000 (RUT) notched another new high. All of this bullishness is not keeping the bears away, though, as selling pressure came into equilibrium with buying pressure at the close for the second day in a row. What this indicates is that the bears are still unconvinced that a summer rally is in the cards. However, a falling VIX is telling us otherwise and it may be the bulls who get the last laugh after all. Trade Note: Are the homebuilders back on track?
Yesterday's bearish analysis on how rising mortgage rates could hurt the housing market (especially the home builders) was apparently not taken too seriously by investors. Today, the home builders came charging back with some individual names gaining as much as 7% over yesterday's close. But is this the start of a renewed rally or just massive short-covering? Methinks it could be the latter but we won't know for sure until we get some sort of confirming signal on either side. If you're itching to play the upside, I would wait until the home building etf (XHB) breaks through $30.50 resistance. If it's unable to break that level, then we could see a fallback to $28 support. Trade Idea: Are estimates for this earnings season too low?
Analysts have been predicting sluggish earnings growth for Q2 and Q3 for some time now but recent opinions have been revised upward with some analysts grousing that perhaps the targets were set too low. (See this article
in Yahoo! Finance for further info.) Should this prove to be the case, then this would be just the catalyst needed to propel the market higher. You gamblers out there may wish to consider throwing a little dough at some at-the-money or slightly out-of-the-money index call options to take advantage of this possible scenario. Subscriber Notes:
I was researching Canadian-based insurer and investment service provider Sun Life Financial (SLF, $31)
as a possible Stock of the Day pick. Today's chart break out on heavy volume attracted me to it. Several hours of research showed that there is a lot to like about this company especially its low price to free cash flow, lower than average debt, good growth prospects, and decent dividend (4.4%). The only reason I didn't add it to the Stock of the Day list was because there doesn't seem to be any institutional interest in it possibly for the reason being that most of the analysts feel it is already fairly valued. (The top price target estimate is $34 giving the stock not much more expected upside.) However, analysts have been wrong in the past and I do think those investors seeking income plus some price appreciation may want to take a closer look at this company.
You're welcome. 2:20 pm ET: Intraday support/resistance:
VIX 14.05/14.65 (VIX under 15 and falling is very bullish)
Trin range: 0.65 - 0.95 (falling Trin is bullish)
Average VWAPs: +89/-44 (bulls in control but bears haven't gone away) July 8, 2013
One might have thought that this morning's pop on the open would continue to boost the major averages but something funny happened on the way to the rally--the bears stepped in. The early morning buying pressure dried up as the bears began to fight back. Buying pressure virtually equalled selling pressure at the close and market direction is still anyone's victory to claim at this point.
The good news is that the volatility index (VIX) finally managed to close the day under 15, the lower bound of the bull/bear demilitarized zone. (Above 20 is considered bearish while under 15 is considered bullish.) This is the first time in over a month it's been able to do that and is one strike against the bears. However, today's topping tail in the market-leading Dow Transports (DTX) could be the start of another leg down. As you can see from the chart above, the overall trend is down. While the chart of the S&P 500 (SPX) is showing a similar pattern, it's interesting to note that the small-cap Russell 2000 (RUT) hit a new all-time high today. One thing is for sure, though, divergences abound and it's anyone's guess which side will wind up the victor. Results of this earnings season--kicked off today by Alcoa (AA)--could be a deciding factor. Market Lowlights: Home builders crumbling
Potential first time home owners are getting stung not only by the recent jump in mortgage rates but also by rapidly rising home prices. This is forcing some back to the sidelines and the specter of rising interest rates will only serve to keep them there. This gloomy report spells trouble for the home building industry. The spectacular rally made by the home builders following the bottom of the 2008-2009 mortgage crisis appears to have come to an end.
Consider the home builder etf (XHB)
. This basket of home building stocks found a bottom at $8 in 2009 and went on to gain 300% to reach its peak value of $32 this past May. Since then, the home builders have been back-sliding on fears that the Fed will begin phasing out its quantitative easing program.
Today especially wasn't kind to this industry group with most of the major players suffering losses in the 2-4% range today. Of special note are KB Home (KBH, $17.68), Lennar (LEN, $33.05),
and M/I Homes (MHO, $21.81)
, all of which broke intermediate support levels. Unless the mortgage market firms up or housing prices drop, I'm expecting further downside in this group despite still reasonable valuations.
But is now the time to short this group? Maybe. My pick out of the above mentioned stocks would be Lennar as it has the weakest chart of the bunch. However, I would probably wait for the XHB to break below $28 support before initiating a short position. Lennar has fairly liquid options and there's quite a bit of open interest in the July 32 put strike. Please note that if you're considering this trade, it's not for the faint of heart and as always, do your own research first. Subscriber Notes:
There are no new entries. 1:55 pm ET: Intraday support/resistance:
VIX 14.5/15.3 (VIX slipping under 15 shows that bulls are wrestling control from the bears)
Trin range: 0.8 - 1.15 (Trin is falling which is bullish)
Average VWAPs: +47/-63 (bull/bear fight for control) July 3, 2013
Yep, true to form the holiday shortened trading day opened down and closed up. Traders who bought the S&P right after the open around 1606 and sold after it gapped below 1618 a half an hour before the close could have pocketed some serious change--at least enough to fund a respectable Fourth of July picnic! Friday, though, is a full trading day with the jobs report due out before the bell. Since what the Fed does is directly tied to unemployment, the jobs report is a closely watched number. Because of the holiday, trading volume will be light meaning that any sort of move in either direction will be amplified. Friday could prove to be a field day for momentum traders and if were one of them, I'd be glued to my computer. Despite today's rally, the DTX closed in the red following two days of topping tails--an ominous indication that the market will be heading back down. The fact that the 16 level is again providing firm support for the VIX is showing the staying power of the bears and that is something not to be taken lightly. All in all, the trend still is to the downside. A holiday note: Time to review your portfolio!
When it comes to portfolio maintenance, many people either do not have the time nor the inclination to weed out the losers and search for replacements. If you have some time this weekend, now would be a good time to review your portfolio and to generate a game plan should the market continue to drop. If you're not a self-directed investor, consider contacting your broker or investment advisor to devise such a game plan. It would also be worth spending a little time surfing your online broker's website to take advantage of new features and online educational programs to further your investment knowledge and trading skills. Most brokers now offer a vast array of trading tools along with virtual trading platforms so you can test out your ideas. I have very little time myself and am guilty of not knowing all the features and tools that my online broker provides and I, too, should spend some time this weekend on the learning curve. I've found that the few hours it takes to surf the site has well been worth the effort and I urge you to do it, too.
Note that the Stock Market Cook Book is taking the weekend off and we won't be updating the blog nor the Subscriber Services until Monday. Have a safe and happy holiday weekend! Subscriber Notes:
There are no new entries. July 2, 2013
The past couple of weeks has been a struggle between the bulls and the bears. Yesterday, the bulls strength began to tire mid-day as the bears stepped in and today;s action was a repeat of yesterday's. The VIX briefly dipped its toe under the 16 level yet again before charging right back up. Trading during this holiday shortened week is light which intensifies any pressure on either side--something that is probably making day traders happy. The market closes early tomorrow (1pm ET)
and on these holiday shortened days it typically closes in the green. Gamblers may wish to take advantage of this situation using futures or options. (Buy calls/futures early and sell at the close.) Friday, though, could be a different story as the bears might finally take charge although trading will be very light. We probably won't get a clear picture of what's happening until next Monday.
Today's notable market action was dominated again by the regional banks where 48 new highs were made. Two other newsworthy events: 1. The dollar (UUP)
gained against foreign currencies most notably the Aussie buck (FXA) now at a multi-year low; 2. The military coup in Egypt must have been good news because it sent the Egypt etf (EGPT)
soaring, up 6% on heavy volume. This etf has been decimated and could rally again depending on the outcome of the new ruling regime but that's a very risky bet at the moment. Subscriber Notes:
There is one new Stock of the Day. 1:40 pm ET: Intraday support/resistance:
VIX 15.9/16.6 (VIX having problems staying under 16 shows that bulls are losing control)
Trin range: 0.8 - 1.05 (neutral)
Average VWAPs: +32/-90 (bears are taking over) July 1, 2013
The major averages have been playing the same tune in recent days: The bulls charge out of the opening gate only to find themselves slowing getting corralled by the bears. Last Thursday, 1620 was the high water mark for the bulls. On Friday it was 1616, and today 1626 proved to be the upper level of resistance. The fact that the bulls have been unable to make a meaningful intraday advance is telling us that the bears are gaining ground. Another important tell is that the VIX is having problems breaking through 16, a key level of recent support. It's only managed to breach that level twice in the past month and then only for a very short periods of time. The fact that 16 held firm today despite multiple tests is showing the strength of the bears. However, they may have to wait until next week to celebrate as markets have a strong tendency to rally just before major holidays. Today's notable market action: Agricultural commodities getting plowed under as banks continue their growth spurt
Shares of the Grains (GRU)
and Corn (CORN) etns
have been trending down steadily for over a year. From their peak values, both funds have shed more than a quarter of their values. Today, both slumped under support and are looking to retest their 2012 lows which would be about 7% below today's closing values.
The question is: Should you short these? I wouldn't simply because the risk/return potential is low. Instead, commodity players should put them on their watch lists for when they do turn around to begin accumulating long positions. Note that another way to play these mainly field-based commodities (soybeans, wheat, sugar, coffee, cotton, corn) is to use the Agricultural etn (JJA)
as a proxy for them all. There are options on both CORN and GRU but not on JJA, and the options field (no pun intended) on CORN is the more robust.
On the flip side, regional banks and insurers were among today's highlights. There were 30 regional banks on the New Yearly High list and 9 insurers. Both of these groups were greatly beaten down during the Great Recession of 2008-2009 and are still undervalued relative to the overall market. Dividend yields in both groups are in the 1-3% range and both are expected to do well in a rising interest rate environment.
Two of the more popular regional bank etfs (KRE, IAT)
continue to hit new highs while the Insurance etf (KIE)
recently bounced off $52 support and is looking to retest its recent high of $55 which is just above today's closing price. I've been touting the regional banks for the past several weeks and although there's still time to get in on the game, the door is closing fast as valuations move higher. Right now, insurance may be a better bet as many of these issues are still trading at depressed levels. For example, the four insurers breaking out to new highs today all have P/E's ranging from 8 to 16: Endurance Specialty (ENH, $52), Genworth Financial (GNW, $12), Lincoln National (LNC, $37)
, and Maiden Holdings (MHLD, $11)
. Of these, I like Genworth because at $11.92 per share it is significantly under its tangible book value
of $25.86. The one downside is that it's the only one of the four that does not pay a dividend. Subscriber Notes:
There is one new Stock of the Day. 1:15 pm ET: Intraday support/resistance:
VIX 15.8/16.9 (falling VIX is bullish)
Trin range: 0.7 - 1.05 (neutral)
Average VWAPs: +68/-44 (bulls in charge but bears are not going away)