07-06-14 Trade Plan

The market continues to move in an uptrend.  Throughout the shortened week we saw the 15 minute trends in the indices that started last Friday continue into the close on Thursday and that is where we are now.  Many up trends in individual names continue to emerge and play out across many sectors, this is a healthy market for now.  It has been for going on 8 weeks now and I have been a broken record in these weekly trade plans.  The only warning sign we have seen throughout this entire 8 weeks is the RSI/MACD divergence in the SPY and the market blew through that.  This created a failed divergence and is bullish.  Don't look for patterns, look for trends.

I am sure a lot of people are looking at the RSI on the NASDAQ and I will agree it is pretty high up there.  Paired with the IWM at resistance there is technical justification to say that bulls have some obstacles to get through.  But I follow trends, I don't look for tops or reversals.  Since we have been in this 15 minute trend that will be of most importance to watch and if that trend turns over then we have supporting trends on both 130m and 65m trends.  Trailing stops are always in place so honoring those is job number 1, but just because a trailing stop gets hit doesn't mean the trend is over.

The bond market failed to hold a trend continuation last week and has now put in a lower low.  The high at $114 is an important one for me at this point since both bears will be defending it as their lower high after a lower low and bulls will be fighting to break it but for now bears are in control.  Bears do not have any supporting trends in place though which would be a 130m or 65m trend, so it is really no mans land until one is in place.

As far as any particular sectors go, I try to give some good looking setups each week but the fact is I am all over the place in individual stocks because there isn't a sector that's not participating.  They all have supporting trends at some level and I focus on the ones that are participating when they are participating with 30m or 15m trends.  I have mainly been in technology, discretionary, and healthcare recently because those are my preferred sectors and they are participating.  I'm also in industrials, energy, and financials on a smaller level.  Some I use stock, some options, some both depending on how the instrument moves.. so I'm all over the place.

That's about all I have for this week.  Some good examples of how I look at the markets and apply my analysis.  If you are curious on how I use the orange YTD line on my charts I wrote a post last weekend about it.  Link here - YTD line blog post.  It's a much better sentiment gauge than anything you'll ever use in the time frame we are looking at.  The market doesn't lie, fabricate, or blow things out of perspective and that single orange line sets the atmosphere that the instrument is going to trade in for the entire year.  It is absolutely part of the big picture and I find it necessary enough to keep it on the chart.  Honor your stop losses and your trade plan.  Thanks for reading, see you Monday.

Trade well,
-Michael