03-30-14 Weekly Review & Watch-list

It seems like as we continued to get deeper into March, the more boring things got and I'm hoping we just hit the climax of boring as March comes to a close and we get into Spring time trading.  In hindsight the most profitable moments would have been to short the strongest market leaders right into their rising 50 day averages (ex. $FB, $FEYE, $GOOG etc.) and I feel that is a sin to do even if there is a rotation happening.  So for me, aside from some bond trading I didn't have much to do.  A clear theme we are seeing is money moving out of the high growth areas and into big cap tech and energy stocks.  This is overall a good thing for the market since the money isn't just leaving the market but I just don't care to build a portfolio around them until the market is participating to some extent as well.


There isn't much more analysis to go into the S&P than I already did last week.  Basically I am looking at the 50 day average right below price at $183.5 and a swing level above the 50 at $184.  I am just grouping that area together and saying if we break below that general area, there is likely more downside to come.  For upside I will be looking at this 65 minute chart to stop making lower highs and start the process of higher highs and lows.  Bonds really look good for more upside and have been a great trading vehicle recently.  Along with everyone else I think $115 is a good place to look for a daily price target, but don't think we are just going straight there.  The bonds will look great for higher prices at the close then make a big gap down the next day, so understand how they trade and how they shake people out before making your entries (or exits).  Note that these one day swings can impact a $2 option by .50 cents to $1, so it is important to shave profits and add when appropriate.  I am still waiting on gold to show evidence of buyers showing up but I have yet to see any.  I'm still of the belief that bears won't have it in them to make a lower low which would imply the bulls are going to make a higher high.  Still just waiting for evidence of that.

Notable sectors are energy and utilities.  It is a much more defensive environment and I am not a hedge fund manager that has to have my cash allocated somewhere, so I take advantage of that in times like these.  I don't want to be forcing myself into equities, picking out a sector or two that is performing decently, if that isn't where the risk is being put on.  Know what kind of market conditions you are in, it can go a long way.



I have been hearing a lot about how the internals are breaking down and how everything is falling apart beneath the surface.  Well if you consider biotech and high growth names to be everything, then yes.. everything is falling apart.  But if you consider everything to be all the stocks in all the sectors of the S&P then not so much.  Percent of stocks above 200 & 50 SMA are both holding up rather well, that is not to say they will continue to do so, but they are for now.  The VIX has not seen any spikes at all for the large divergence it continues to hold against the S&P.  I still hold the thought that IF the S&P starts getting momentum to the sell side then the VIX will get a larger spike because of the divergence.  The IF is very important though.


All Symbols Focused to the Long Side:

AEP 
CAT (chart not above)
CF 
CSCO 
DIS
DUK
EOG
HES
HPQ
IBM
MSFT
ORCL
QCOM
SNDK
TXN
XOM

As you can see I am keeping the symbols focused on where the money is moving to.  If the S&P can start making a move higher, I think a lot of these names will explode to the upside.  Other than that I think relative strength continues in these names and the slow grind higher resumes with or without the S&P.  What I don't want to do is build a portfolio only for the S&P to tank next week, in relative strength names or not.  It's not like it takes me a week to build a portfolio, I could do it in a day but I just need to see some better action in the overall market.  As an option trader I would rather have my risk on in names with relative strength as the S&P pushes higher.  If you overlay the S&P on top of any S&P stock, you will see why I have this preference.  Or you could just go read my piece on relative strength and participation here: Using Relative Performance to Trade Professionally.  Other asset classes are fair game though, emerging markets, bonds, gold, oil, nat gas, currencies, etc.

Thanks for reading

Trade well,
-Michael