Personally I am feeling like the risk of the leadership dragging down the rest of the markets is greater than the worry of missing out. Especially after we worked all week to move higher out of that range in the S&P only for the NASDAQ to take everything down with it on Friday. On top of that the QQQ traded over a 100 million shares today and we haven't seen volume like that in about 2 years, so shorts are looking at that feeling confident having a stop loss above today's high or right around $90. Something else I want to mention about the S&P is that it is really getting sloppy up here. Instead of a nice clean consolidation we are getting these wide swings back and forth and sellers are selling with good velocity, this is not a sign of bullish consolidation even if we haven't breached the key swing low. With all that said, anticipating either direction is what needs to be done.
The bond and gold market are both starting to turn back up with a rising 50 day average & higher highs and lows in place, so that is somewhere I will be looking for trends to emerge. Also some emerging markets are looking like they are starting to make comebacks. For now I have my eye on the broad market ETF ($EEM) and Brazil ($EWZ). They both put in higher highs after making higher lows and they started this recent rally on some really good volume, that is something I like to see. 50 day averages are also starting to curl back upward. Specifically, I am looking for a pullback in here to put in a higher low and continue higher - similarly to what I have been waiting on in gold that we are now beginning to see. Here are the charts below:
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Like I already said I am not interested in U.S. equities to the long side as much as I am other markets (for trend following) but I have a plan for either direction and have stocks I will be focusing on for either direction as well as specific strategies that I will touch on. Sectors I will to continue upside trend following in are pretty limited to energy and materials, and that is only if the S&P resolves higher and I will be using stock to do that. I have no problem shorting technology and healthcare stocks if the opportunity presents either using ITM options or option strategies but that would be for quicker trades since we fall faster than we rise. The energy and material stocks include: $AA, $X, $EOG, $HAL, $LNG, $PXD, $VLO, $SLB. The technology and healthcare stocks include: $BMY, $CELG, $GILD, $REGN, $BIIB, $ILMN, $MA, $V, $SIRI, $YHOO, $DDD, $BIDU.
The internals for the S&P are actually staying in tact if you look at them here: Percent of S&P stocks above 200 SMA, Percent of S&P stocks above 50 SMA, VIX. The price action always comes first but these are good to keep track of. As always I will be on Twitter at @M5amhan tweeting about the stocks I am following and how they are interacting with market conditions. So go follow me. Thanks for reading
Trade well,
-Michael
