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I know it has been awhile since I have written. As most of my followers know, I have been wrapped up in a cross country move. While we have made it to the other coast, we have yet to move into a home of our own. Corporate housing is fine but finding a home in the Bay Area has proved quite the challenge. We have finally settled on a house and will be moving in, in August.
Meanwhile I want to keep you all abreast of my thoughts in all things market. Members of my chat room know that my daily market timer turned to red back on July 8 and I have largely been out of the markets. I began dipping my toes into XIV as volatility started to spike with the unfortunate airliner incident in Ukraine. I have managed to build a half size position thus far and am ready to add on dips. As it always does, volatility has already pulled in and XIV has gone higher.
SPY is putting in a buy signal of sorts today with the gap up from yesterday's hammer and IWM is working on breaking it's current downtrend with a move through the 8 ema. If these moves can hold today, my timer will turn green. If not, they may need another day or they may just be a test of resistance levels before continuing lower. Here is the IWM chart.
We are moving out of our house today and I will be mostly offline through next week.
Yesterday's action showed some indecisiveness on the part of the bulls but they kept the charge by the end of the day. Futures are lower this morning and it will be interesting to see who holds the reins by the end of the day. Meanwhile, I will be setting hard stops based on weekly charts in my positions. I will not likely be putting out Morning Reports next week.
Good Trading all!
Dip buyers came in yesterday and negated the sell signals in the indices with another close above the 8 ema in the SPY. The bulls are still in charge. As such, I added back a couple of positions yesterday.
The movers are here and are packing us up so this is a short note today. I will not likely get one out tomorrow.
Triple dojis followed by a gap down and a close below the 8 ema is a sell signal. That is what SPY is presenting after yesterday's session and the other indices look just as bearish. Perhaps tension in the Middle East caused investors to sell or maybe it was yesterday's housing report. In any case, that sell signal is certainly being confirmed today as futures head lower after a horrific GDP number. Analysts were expecting a loss of 1.7% quarter over quarter but numbers came in with a loss of 2.9%.
Yikes! Can't blame that on the weather. We are in a recession folks. For all those who roiled at Ms. Yellen's decision to keep rates low claiming the data clearly showed recovery, should now have their tails between their legs.
As far as the markets, they are going lower for now, confirming a clear candlestick sell signal. But I don't discount the idea that "bad news" can be "good news" for markets as it justifies continuing low interest rates and not increasing taper. The underlying trend is still up so this is certainly not the time to go all in short, although a mix of a few shorts and a few longs can work as the market corrects. SPY is in a rising channel and likely heading toward the bottom of that channel which can coincide with the breakout level of 190.48. That will be the first major level of support that I will look for if it loses the 34 ema, currently at 192.62.
I caution traders about jumping too soon in the other direction unless you are comfortable making quick trades. Remember that Cash IS a position. I currently have three positions left after taking some profits yesterday on bearish candlesticks. I will watch them carefully at the open and will not hesitate to drop them if they cannot hold up. The movers come tomorrow so I will be very busy and will be setting hard stops some time after the open assuming I still hold positions. My mostly cash position will work just fine while I drive across the country next week. Here is the SPY chart.
As SPY zig zags within its rising channel, we are seeing some profit taking after reaching new highs on Monday. So far we are not seeing any major selling, just a pull back within a channel in an uptrend. I will continue to manage individual positions keeping those that are working on a weekly basis.
As I come into the home stretch for getting ready for my move, I will be around less and less. After tomorrow, I will be relegated to my laptop on a part-time basis while my desktop computer and multiple screens get packed up. I don't know if I will be able to get out a Morning Report every morning but I will do my best to keep followers informed of my thoughts on the market in the coming weeks. Here is the SPY chart with the channel.
A few people have contacted me to ask about the divergence in the indices. Rest assured, there is no divergence. The S&P did not sell off on Friday while the other indices rallied. SPY paid a 94 cent dividend that was reflected on many charting platforms and appeared as a gap down, but S&P did not gap down. In fact, it made new highs and closed at a new all time high reflecting the components within the index and my trade timer remains green.
I chart the ETF derivatives of the indices because they have volume and that gives me a more complete picture of where markets are heading but I do note that the derivative products trade and pay dividends and are therefore not clean representatives of the components within the respective indices. Most of the time, they correlate, but occasionally they do not and when they don't, I base my analysis on the real index and not its ETF.
I remind my followers that I will be largely gone for the next two weeks as I get ready to move across the country in a few days. Here are the daily SPX and the SPY charts side by side showing Friday's difference.
SPY (and the S&P) closed at a new all time high yesterday and held it's breakout of the previous day. Just like the weather, markets are feeling hot, hot, hot. Markets were only slightly spooked by Obama's speech on Iraq but ended the day on a strong finish. The move higher this morning after yesterday's doji in SPY confirms that the bulls continue to be in charge and the rally keeps on keepin' on. Higher futures this morning even after news that housing is taking a leg lower, stalling its recovery, tells me investors still like the benign news that will keep interest rates low indefinitely. I do note that today is quad witching options expiration which could briefly put a bit of volatility back into this market.
As I wind down family life in the Philly area and prepare for my move out west, I will be in and out over the next two weeks (mostly out) but will check in with my chat room when I can. The chat room is currently free through July for anyone who would like to join us since I am around less than full time, but we have a wonderful group of seasoned and newbie traders exchanging ideas. If you are interested in joining us, email me at firstname.lastname@example.org.
Here is the SPY chart.
Columbidae is the bird clade that constitutes doves and pigeons....which of course includes our lovely Fed Chair, Ms. Yellen who continues her dovish ways. Did you really think she was going to go all Mark Carney on us? I didn't. Markets have reacted quite well to this dovish sensibility, what with rates staying low forever and QE tapering ever so mildly. Both SPY and IWM have broken out of their respective JHook patterns in a rising channel. Here are the charts.
Markets continued beautifully yesterday as each major index continued to set-up JHook patterns and closed above respective 8 EMAs.
But all I hear from retail traders is a fear of Janet Yellen's decision today regarding interest rate hikes and the great "tapeer." Prophecies can be self-fulfilling, but it would surprise me if Janet suddenly changed her dovish tone. My port is fairly light coming into this at less than 40% invested and I will continue to manage it from there. Here is the SPY chart followed by a video reminder of tapeer tantrum behavior.
You and I might care but US stock markets don't. Maybe that will change but the continued rally in these markets with little rest tells me nobody is worried about Iraq. When it comes to trading, it doesn't really matter to me because I read what the charts tell me. They have all put in nice JHook pattern set-ups and SPY, IWM and the Q's have closed above their respective 8 ema's. Here are the IWM and SPY charts.