Market Observations as of Aug 4, 2017

Transcription

1 Market Observations as of Aug 4, 2017 By Carl Jorgensen - For Objective Traders - For educational purposes only. Not Financial Advice. This week The mixed responses to earnings this week has resulted in mostly narrow and quiet range market indexes. The Dow has been the exception, delivering new all time highs every day this week. The S&P was nearly flat this week, while the Nasdaq and the Tech sector stocks pulled back a little. All of the FANG stocks (FB, AMZN, NFLX, GOOGL) pulled back some this week. Just like last week, it has been just a few (large cap) stocks making significant moves that impact the major indexes this week, so it pays to keep track of these leaders. Chop will likely continue to be the descriptive word, as diverse market forces continue to sort it all out. Copper made record highs last week, and held onto all of those gains this week by remaining quiet and horizontal at or near these new highs. Gold was nearly flat this week as it oscillated in the $1,260 to $1,277 range. Oil oscillated just under $50 as it was also nearly flat for the week. The small cap stocks saw pressure most of this week, with the Russell 2k dropping back to inside its box where it has been contained for all but six days since Dec With the Dow Transports pulling back to within their box, economic growth continues to have doubts. The Financial sector did break above its Resistance late this week, as it saw strong participation from several banks and credit card companies. This revives some hope of economic growth, even if the Transports are not yet confirming. Now, let s look at the charts, since this is where we look for clues to the market behaviors or changes.

2 S&P 500 weekly chart as of Aug 4, 2017 The S&P has had two weeks now that were both mostly quiet and flat. This is in the context of strong bullish markets since the Nov 2016 Elections. Trends rarely go straight up, they usually take a rest from time to time before continuing.

3 S&P 500 daily chart as of Aug 4, 2017 The daily chart tells the same story, two weeks of quiet and flat markets near the all time highs. The True Range (ATR-1 period Grey) has been below the 14 period average ATR (Yellow) most of the time, as seen in the lower panel of the above chart.

4 DJIA Weekly chart as of Aug 4, 2017 Unlike the S&P, the Dow Jones Industrials have remained in a steady uptrend the past two week, in the context of a bullish trend since the Nov 2016 Election. Note how steady the slope of the weekly chart shows this advance the past 12 weeks.

5 DJIA daily chart as of Aug 4, 2017 The daily chart shows the details of the Dow delivering new all time highs 8 days in a row and busting above the 22,000 level the middle of this week.

6 DJ Transports weekly chart as of Aug 4, 2017 Even with the DJ Industrials have been making new highs the Transports were pulling back the prior two weeks to return to the box they have been within since Dec This week was mostly horizontal for the Transports, finding support near the 200 day SMA this Wednesday.

7 NASDAQ weekly chart as of Aug 4, 2017 The Tech heavy Nasdaq pulled back this week and the prior week.

8 NASDAQ daily chart as of Aug 4, 2017 Here we see the Tech heavy Nasdaq pull back hard last week, and continued a little more downward drift this week.

9 IWM daily chart as of Aug 4, 2017 The Russell pulled back last week and this week, to dip below both its 20 day and 50 day SMAs this week.

10 QQQ daily chart as of Aug 4, 2017 The QQQ looks a lot like the Nasdaq composite, pulling back last week, and little more this week. Note that the Qs chopped mostly horizontal this week within a narrow range. Both the Homebuilders and Healthcare sectors were horizontal and quiet this week.

11 US Dollar Index weekly chart as of Aug 4, 2017 The US Dollar dropped more this week, to find and confirm support at the Lows from Aug 2015 (Yellow arrow) just above the 200 week SMA (Purple).

12 US Dollar Index daily chart as of Aug 4, 2017 Here on the daily chart, you can clearly see the support this week at the lows from two years ago (Yellow line). The bear trend this year remains intact for a weaker dollar.

13 Oil daily chart as of Aug 4, 2017 Oil pulled back and oscillated this week, after starting the week testing resistance near the $50.40 area. Note the convergence on this chart of Oil price, 200 day SMA (Purple), the trend channel Resistance (Orange line) and a Round Number ($50). It is not uncommon for either Resistance or Support to be found more likely at a level where multiple technical studies converge.

14 VIX daily chart as of Aug 4, 2017 Options volatility remained low this week, hovering near the 10% level.

15 XLF daily chart as of Aug 4, 2017 The Financial sector broke out of its box this week. The box is defined by a price range and a time period, where price appears to be contained as markets seem to pause for a while before either resuming their trend (more likely) or reversing their previous trend (Less likely). We saw the XLF break out Wednesday and Friday this week. Looking at key stocks within this ETF is one way to find who the leaders.

16 XLE daily chart as of Aug 4, 2017 The Energy sector has been in a bear trend all this year, until last week when it broke above its 50 day SMA (Blue). Note that this ETF has dipped back down this week to find SUPPORT now at the 50 day SMA. Also note the convergence with and support from the 20 day SMA (Yellow). Maybe this is a change in character, and a second clue? If you believe the Energy sector will change to bullish, or oil prices may rise, then this could be a low risk entry near the 50 day SMA. I have a strong feeling for positive oil prices, but if my Objective trading plan does not use feelings as a criteria, and if all other criteria are met, then I must take the trade, if I am to stick to my rules. I have been humbled before by my rules doing a better job than my gut.

17 XME daily chart as of Aug 4, 2017 Interesting. Late this week we see both the 200 day SMA (Purple) and the prior Resistance (Yellow Arrow and Yellow Line) as new support. We will look at US Steel and Alcoa Aluminum charts below to see what they show us now.

18 XSD daily chart as of Aug 4, 2017 The Semiconductor sector was hit hard this week, giving back the prior month s gains. This can help explain the weakness in the Tech sector we saw in the Nasdaq charts above. Now let s look at some stocks. We follow these stocks since they tend to often be leaders within their sectors, as well as can help give us better opportunities than can sector ETFs.

19 AAPL daily chart as of Aug 4, 2017 Apple was nearly right on its 50 day SMA (Blue) this week just before Earnings, then gapped up Wednesday to new highs after earnings. Note the support late this week was at the prior Resistance levels from the highs of May.

20 AMZN daily chart as of Aug 4, 2017 All four of the FANG stocks had a negative week this week, some worse than others. This week got quieter as the days past. AMZN ended the week below its 50 day SMA. Last time that happened, it didn t last but for two closes. Let s see what happens this time.

21 NFLX daily chart as of Aug 4, 2017 NFLX pulled back this week, but still kept above its gap zone from last month.

22 NVDA daily chart as of Aug 4, 2017 Nvidia is the exception within its sector, as it has been the past few months. This Semiconductor stock moved back up to retest resistance (prior highs) this week, tracking its support at its 20 day SMA (Yellow). This pattern appears ready to break resistance as soon as that supply is consumed. This stock seems to be ignoring its sector. Remember this, because it s more likely that it continues to ignore its sector and the overall markets as well. Per my experience, it seems that Behaviors are more likely to continue, than they are to change, and that belief or bias is reflected in my trading plan.

23 V daily chart as of Aug 4, 2017 Visa has been one of the strong stocks in its sector, and the persistence of its retesting resistance here, suggests it may be ready to break out to higher highs. (Behavior continues.) AXP looks similar this week as well. GS and MS are doing well this week. No wonder the XLF is breaking its Resistance now.

24 GS daily chart as of Aug 4, 2017 Note the wide range day on Friday (Aug 4 th ) to retest prior resistance from 3 to 4 weeks ago.

25 X daily chart as of Aug 4, 2017 US Steel had a rough week last week, but then seemed to find support this week just above its 50 day SMA (Blue). Note the pattern of both Higher Lows (Green arrows) and Higher Highs (Red Arrows). That is my definition of a bullish trend. I see the area between the 50 day and 20 day SMAs as a low risk entry for long positions.

26 AA daily chart as of Aug 4, 2017 Alcoa has been doing well since late June, and the small dip last week was fully recovered this week. The highs from last week and this week (Resistance) look like they could soon break. If you are already long, then hold on until it changes character. If you are not long, then this might be a high risk, low rewards, entry area, that is not worth taking.

27 BA daily chart as of Aug 4, 2017 Boeing pulled back only a little this week, and held on to most of its gains from the prior week s gap and earnings response. The top of the gap day range is one area to look for support (Yellow line). If this fails, then it could be time to exit.

28 LMT daily chart as of Aug 4, 2017 We noted the bounce off of 50 day SMA support about a month ago. Note how the prior resistance (Yellow line) was broken, and then the next level or resistance was established in mid July (Orange line) that was broken early this week. Ride your Winners is one of our key objectives, and LMT has not yet given us a sign that it is done.

29 CAT daily chart as of Aug 4, 2017 CAT had a horizontal week, holding onto most all of the gains from last week s earnings pop. I like how price seemed to rally Thursday and Friday of this week, to retest the prior highs from last week. Ride your winners cause you don t know where it will end, until AFTER the trend ends.

30 DE daily chart as of Aug 4, 2017 We pointed out this pattern again last week, with DE making both higher lows and higher highs, and retesting its Resistance in a very persistent form. This week we saw a slow drift upwards, and that s ok. It confirms the high odds pattern we saw the prior week(s) so we keep riding the winners.

31 TSLA daily chart as of Aug 4, 2017 The week started out bearish for TSLA as price dipped Monday and Tuesday to find support at the (Orange) Trend Line. Note how narrow of a range Tuesday was, compared to Wednesday, the day of Earnings. The $320 area near this Trend Line (Orange) was a low risk entry, with a stop near $300 and a possible target if $380 is retested; this gives a $60 gain for a $20 risk, or a 3:1 Reward-to-Risk Ratio. That meets my criteria for the risk being worth taking. With earnings reporting on Wednesday after the bell, the Options implied volatility was pumped up, so that was taken into consideration in constructing a position. Selling a Put spread to help pay for some Calls is one idea to use the Volatility crush to help pay for the position. Well TSLA opened the next day at its 50 day SMA and moved higher Friday to end the week nearly $37 above the Trend Line Entry. (Note the Orange Trend Line support was draws between two lows, from the Dec low to the July 2017 Low, and extended to the right. This method captures ALL price data above the support trend line for the period being studied.) We are likely to continue to see more Chop next week, as earnings responses are mixed, and a few (mostly large cap) stocks drive moves in the indexes. Remember, anything can happen, so plan accordingly. Trade Smart, CJ