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Sunday Evening Comments

I've arrived back home a little later than expected today following a short 3-day vacation. I had planned to put together a market update tonight but with the new subscription service rolling out today & not much new to report since my last update, I'm making it a priority to answer any questions or help with any issues transitioning from a free-trial/open enrollment period to the Gold or Silver membership terms. New members that recently started a 3-week trial will still have full access (Gold level) for 3-weeks from their sign-up date while anyone that has donated to the site will continue to have full access throughout April & will soon receive a email detailing your total contributions & matching credits, which can be applied towards any future subscription services.

QQQ daily April 1st close

QQQ daily April 1st close

Regarding the broad markets, about the only technical development worth mentioning since I left town on Friday was the fact that most US stock indices finish the trading session to print bullish engulfing candlestick on Friday. I won't try to minimize the bullish potential of those candlestick patterns other than to say that the markets, especially the Nasdaq 100/QQQ (the index which I am most concerned with), still only managed to once again, essentially close at the bottom of the very technically significant Dec 31st/Jan 4th gap. That keeps the markets in a wait-and-see mode heading into the week: Will the $NDX solidly enter those key gaps and if so, will they be able to do more than just a backfill of those gaps before a healthy pullback or more lasting trend reversal?

As the bulk of the programming updates & membership roll-out has now been completed, my focus will start to turn back to the charts this week. I should have the short trade ideas updated early this week & with the long trades updated last week, my focus will turn back to looking for the most attractive setups, both long & short. I'm also open to any ideas, individual stocks, sectors, etc.., to replenish the Growth & Income Trade ideas as we had quite a few hit their final price targets recently.

 

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Apr 3, 2016 10:05pm|Categories: Equity Market Analysis|Tags: , |5 Comments

5 Comments

  1. snp April 3, 2016 10:19 pm at 10:19 pm

    glad you could wedge in a little vacation time, and glad you charted a course back home. I suppose transports will spike in response to your travel tho.

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  2. trgfunds April 4, 2016 12:05 am at 12:05 am

    @rsotc Hi Randy. Thanks for this. Hope you had a fun time on your trip. Financials and Biotech have not participated in this “rally” I find that very interesting considering the biotechs usually lead, and financials were so “beaten up”. Both are still negative YTD.

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    • snipertrader April 4, 2016 1:30 am at 1:30 am

      Agreed about the sentiment expressed for @rsotc – welcome back and glad you got some much needed time away from the markets and screens!

      Also agreed @trgfunds – that Financials have really been in the tank very weak ( not a good sign overall ) and actually under performed the whole time during the full fledged bull run from 2009 to 2015. So we have a former lagging and former leading sector not really participating in this current snap back. However, and I’ve made some noises about this thru my posts the last few weeks, any underperforming sectors can and may be used as money rotates into them under the covers to hold the indicies up a bit longer. We saw Biotechs perk up recently over the past week and reaching for their one month March 7th high recently. We shall see if they stall out there or move beyond to help buoy the indicies further.

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      • trgfunds April 4, 2016 3:47 am at 3:47 am

        @snipertrader re the underperforming sectors… Seems like a game of whack a mole… brush fire after brush fire. Now we have oil way back in the 30s and falling on a falling dollar. Any dollar rally will spell trouble. We’re a supply report away from being back in the 20s. Whoever or whatever props up this market is gonna have a fun time with that. This february rally feels the most artificial that I can remember. Just a hunch, but maybe they left out biotech and put their money to work by focusing on buying cap heavy names like AAPL to boost indexes in a more efficient manner. Also, per the sector seasonality calendar, the biotech season just ended. Remember the PPT loves to manipulate things lots of average people are focused on to create “the wealth effect” and they can’t manage it all. That is why I think being short something like the Russell 2000 is a lot better than shorting these fanboy indexes everyone watches. Yet again we have another pivotal week ahead. I keep saying it, but watch oil. At some point if it keeps falling the markets will re-peg to it. Happy trading thanks for the response!

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  3. snipertrader April 5, 2016 9:49 am at 9:49 am

    @trgfunds – Yes a lot of jockeying going on under the covers to hold the indicies up and a lot of decoupling / coupling. As i had posted in another thread yesterday about OIL it’s decoupled recently from Equities. All thru the OIL bear market Equities continued to rally. My take is that as OIL kept falling from the 40’s down into the 20’s it caused a coupling with equities to the downside and pulled equities down due to fear of Energy sector debt defaults. Now OIL has somewhat stabilized in the 30’s off the large rally form the mid 20’s perhaps momentarily that fear is subdued as the FED has also become very dovish ( with lots of counter speak mixed hawkish/dovish cycling taking signals of course ) … but according the the Boss lady Yellen decidedly …. Dovish. So these factors along with money chasing return is continuing to fuel equities ( for now ). If OIL resumes its slide back down again then the fear of debt defaults and further negative impact from that fall out may indeed cause a re-coupling of equities to the downside. As has been stated across threads these past few weeks there’s always some sort or combination of catalysts that wind up causing major turns. We won’t know for sure what they are ahead of time but we can theorize that one could indeed be OIL re-asserting itself to the downside. Remember OIL is the thing that’s been in the major bear market now for years while equities continued to hang onto the bull reigns in the face of increasing economic and financial weakness and imbalances. My view is that equities with falling earnings and earnings estimates are highly valued especially when one assess it on GAAP vs. NON-GAAP. NON-GAAP is all the analysts and wall street seem to push and highlight. But increasingly companies are using and abusing NON-GAAP accounting to manufacture their financials and swipe mismanagement, mistakes, financial “one times” etc… under the rug. NON-GAAP is a giant illusion. If we value equities on GAAP then they are even more richly valued. Eventually this NON-GAAP charade will unwind and investors will become wise to the fact the need to make decisions based only on GAAP. This could also be another catalyst to pressure equities into re-valuing to the downside. The problem of course is that with the reactionary Fed always sending mixed signals and becoming very dovish now ( on the whole – despite all the counter speak ) that pressures interest rates down ( both short and long … even though the Fed does not impact the long curve directly future expectations of their actions do … for instance the renewed talk of more QE on the table which would ratchet the long curve down ) ….. it creates an environment where there is a constant struggle for return on money since rates and future expectations for rates are so low … which creates demand for equity risk assets. As long as they float higher then that money will chase into it. I guess if the Fed had it’s way they would hold markets in somewhat of a trading range … it seems that’s what they are trying to do. Just recall their back and forth talking dovish / hawkish / dovish /etc… They are trying to manage a trading range. The bottom of their trading range I figure was around the Feb lows when they were all getting dovish. The top of their trading range is probably not too far above which is why now we get mixed signals … Yellen reinforcing dovish while numerous other Fed governors talking hawkish counter speak. Hard to pick exact turning points but this one as I have theorized could take longer than expected. And the down leg, when it comes, may not initially be as earth shaking severe or straight down this time around. We could get a downdraft which is then viewed as yet another buying opportunity and in a low rate environment, with a renewed dovish Fed money sitting on the sidelines is just waiting to enter … fuels another snap back and then build up to a true correction / retracement as the distributors of equities ( who are likely quite active currently with volatility so low ) have achieved their goal of drawing in more money and distributing. Just some theoretical outcomes to consider. But eventually the Fed won’t be able to manipulate or hold things up forever. Market and economic forces will ultimately work to reset the imbalances. When risk off returns it will drive flows regardless of the Fed. The problem is that technical analysis to some degree is being compromised and muddied in recent market cycles times based on all the CB interventions and in between speaking / counter speaking. They are not allowing the markets to function efficiently with natural price discovery. They are highly manipulated and cajoled these days, In the longer term though the market forces are too great for any CB to overcome.

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