Rotation Report: half-assed

It was a half-assed bounce to end the week.  We can speculate about a lot right now, as there is a ton of damage out there and a lot of volume behind the damage.  Price action during the first few days of April will tell us plenty as we enter the six worst months of the trading year.

The focus of this week's report is some groups standing out.  They can provide some huge clues moving forward.  Let's dig in.

I compiled 20 of my favorite reads of the week in See It Market's Top Trading Links.

Is vol rangebound?

The VIX seems to be respecting the 13-17 range on a closing basis.

Vol term structure may also be forming a lower range on the complacent side of things.

Group Action

Home builders have hit a fresh relative strength high.  Can price break-out?  The strength is permeating through the space as well.

 Are home furnishings forming a continuation wedge?  It sure looks like it for now.

The sharp drop in many biotech names has many folks preaching bubble.  Biotech's momentum via RSI thus-far is undamaged as it maintains the 2015 range.  Further damage from here would be a big hint.

Travel stocks are testing the 10 and 20 week moving average confluence.

 Hotels are flashing relative strength.

Software is another group possibly forming a continuation wedge.

Last week I pointed out the transports via XTN.  Their breakout failed in a big way as the index lost 4.6%.  Note the dow transports ETF (IYT) is testing it's 200 day moving average.

aaaand finally Emerging markets have disappointed for years now.  The line's I drew are quite arbitrary.  I'm more interested in watching the 36-42 range.

Thanks for reading, have a great week!

Notes for the day

Here's a few thoughts on my mind this AM.  Trade 'em well!

• Yesterday was important in the sense that sloppy bears weren't punished.  That is something worth watching in the coming days and weeks.

• Oil is still in the earlier stage of the move.  

• I'm hopeful to find an attractive pullback entry in GenCorp (GY).

• This week the trade has been to attack pressure points in the market.  Over-followed ideas that have either run their course, or run far enough for profit taking.  Traders are taking wins off the table and that goes for both sides of the market.

• If you have stop areas that you haven't honored...what are you really doing?  I'd call it asking for pain.

• It's never a good time to not follow your trading plan.  This includes selling positions that haven't reached a stop area.

We can't forget...

If you've followed my work for some time you know in 2014 I pointed out major bond market tops.  We can't forget about these as their tunes and what they suggest have not changed.

In ratio's measuring the market's willingness to take risk.

And possibly in the S&P 500 to bonds ratio.

6 reasons I like AK Steel for a long trade

I bought AK Steel shares at the end of the day after some heavy call volume flashed.  It's a trade I might hold for a few days or a few weeks.  Here are sixe reasons I like it:

1.  It tried, but failed to break support on a 'terrible' outlook.  Note the yellow candle.

2.  There is recent emerging strength in the group X, CLF etc.

3.  RSI has improved while the stock has based

4.  A test of the falling 50 day moving average failed to knock the stock to new lows.

5.  The downtrend from last August has ended.

6.  Late day buyers attacked the 4.5 strike in 3 different weeks of April calls.

My plan is to trade it against Tuesday's low of 4.05.  The first target area is the February high around 4.70-4.90.  I'm not recommending you do the same, but I thought some folks might like a look at my thought process.

Thanks for reading!  Trade 'em well

Sedated Market

Vol continues to suggest the market is in a sedated state and isn't focusing on potential risks.  Can this elevated level of sedation continue, sure, but who knows how it plays out.  

Dips this low have led to meaningful corrections in the past, including at last month's peak.  The more sedation, the greater the potential pullback when a new market risk arises.  

A few charts of interest....

The S&P transports ETF staged a key breakout last week.  Now they've pulled back in to support while erasing most of last week's gains.  This is something to eye the rest of the week.

Twitter staged the monster breakout today.  It's going to take a lot to wreck this move.  

 Moving to the daily chart, we see it's pretty stretched over the upper bollinger band as the BB curls up.  Maybe it needs to back and fill, but again, it'll take a lot of selling to wreck this action.  Keep in mind the resistance zone from October.  It'll come into play at some point.

Moving over to Linkedin we see it finding resistance at the gap zone.  I don't see why we'd own it on any time frame at the moment. 

Thanks for reading!

Buy the dip in Gilead?

Over the weekend I shared my negative views of Gilead on Twitter.  Now with the news floating about their Hep-C drugs, I want to elaborate as this may or may not be a great dip buying opportunity.

First the fundamental case I mentioned Saturday.  Their hep-c lineup makes up 50% of sales and consumer reports ranks it as a top outrage in healthcare costs.  The various pressures on pricing is there and will remain there. 

There is a new crop of investors who see Gilead as a very cheap stock.  The problem here is it's only cheap on a few metrics.  The other issue is the performance of the biotech index.  Biotech has soared in 2015 in climactic fashion.  So much so that the group has become overvalued.  When that happens, the stocks that look like bargains tend to be looking cheap for a reason - bad news ahead.  A very cheap looking stock in a fully valued sector is fools gold.

Moving on to the technicals.  There is a very attractive trading argument in this wedging price action, especially with the 200 day moving average so close by.  That said, every other aspect of the chart is a cause for concern.  Most notable is the lack of any institutional buyers since the earnings call gap down in early February.  The only accumulation day since then was Friday, a day in which every large cap stock has unusual volume due to the 'triple witching' options expiration day.

The final consideration is the news.  It seems like this sort-of known news is probably the best reason I can find to buy the stock.

Considering only the factors in the Gilead chart.  I don't see how this is a buy the dip scenario, it really seems like Gilead has just been propped up by the biotech group.  That said, a break over the Feb gap area after this shakeout would be a huge bullish tell.  Time will tell.

Thanks for reading!

Rotation Report: Hot market

 The market decided to go linear mid-week.  At this point, it's just looks really hot right now.  Biotech gapped 3% Friday and gave those gains up.  That's climactic, but we don't know the extent of the climax yet.  The low rate trade came back fast and furious last week and looking ahead, perhaps precious metals have bottomed.  Let's dig in.

We're seeing this shift to a more complacent market via vol term structure.

The VIX ended the week at the prior pivot level.

Breadth is seeing multiple extremes being reached.

 NYSE 52 week highs hit the highest level in two years Friday.

S&P 500 climactic volume also ran hot late in the week.  The readings are similar to that of late October, another time when too many policy bears were lurking around.

At the same time the 5 day total of new highs vs new lows is at the top of it's range.

Group Action

The S&P Transports ETF has reached new highs ahead of the Dow Index.

Materials are back-testing a triumvirate of key moving averages and the prior pivot level.

This while relative strength is testing a long term support.  It's time to look for longs.

Around the globe

Emerging markets bounced at a key spot.  Can RSI break that 50 level?

Japan continues to lead international markets while their government decides to up the equities purchases in their pension fund.

Commodities

Copper staged a bullish outside week.  Meanwhile many commodities are showing selling exhaustion in the intermediate term.  

For more: Check out some of the top reads i've compiled for See It Market's Top Trading Links.

Trade 'em well!

Disclaimer: I've no positions in any of the products or ETFs mentioned here.

Hot commodities

The dollar finally backed off and some interesting action at key levels is starting to show itself in the commodity space.  

It's a huge day in the nat gas trade with inventories out at 10:30.  This week marks the first time it's closed above the 50D moving average since December.

Oil is attempting to spring back above it's major low.  The next few days will tell us plenty about it's prospects moving forward.  

Cotton has found support at this key long term level after briefly breaking below it early in the year.

Silver has fallen within a very sharp channel for two months now as price falls right into the prior low area and long term pivot level.

MY TAKE: All of these markets are showing signs of selling exhaustion and multi-week corrective rallies are likely in store.

Trade 'em well!

Rotation Report: Dammit Janet!

Last week's report mentioned the further near term downside before a 'now what' phase.  We're there now, so the focus of this week's post is all about evaluating the pullback.  It's an important week!

Many growth stocks are trading well while the market dances in no mans land.  The FOMC meets Tuesday and Wednesday with Yellen's next press conference.  The low rate trade is standing on shaky ground.  TIPS suggest we're at a very important point in the rate and inflation picture.  All of this occurring while emerging markets are staring off the ledge.  Dammit, Janet, don't let us down!

Indicator Indications

Vol doesn't suggest we've seen a meaningful low.  Note the 100 day moving average acts as support once again in the S&P 500.

The stock only advance-decline line had a nice bounce, but not the type of follow through we'd expect at a meaningful low.

The Smoothed NYSE McClellan Oscillator is also not showing signs of a meaningful low.

The show-me tell-me ratio has broken out in a big way.  This ratio can be used to measure market breadth trends.  However, right now this move is showing us the effects of a sharply rising dollar are being realized. 

Group Action

Utilities are testing long term support into the FED.  Well rate trade, whattaya got?

Retail continues to lead throughout the market correction.  Note it really strengthened as Gas has pulled in.

Defense doji'd at the 10 week MA.  Momo stocks in the group continue to trade very well including ATRO and GY (no positions).

Energy

Crude crumbled out of it's month long range at the end of the week.  New lows appear imminent.

Shell gave up a long time pivot level after trying to base for months.  The major integrated oil and gas companies must be hurting in a big way.  Ratchet down those earnings expectations folks.  (no position)

International Focus

Japan responded strongly to early week selling with a bullish outside week.  This continues to be the leader and the best international ETF.

The World Index couldn't close too far below the glorious 10,20,40 week moving average confluence.  It's time to step up global equity bulls.

The Emerging Markets are testing a key support.  What a nice risk reward buy spot.  The price structure isn't pretty, but it is a just a range bound market.  If this loses 36, how will there not be a big drag on US stocks?  

 Russia dropped sharply into a multi-year pivot.  BTW, anybody see Putin lately ;) ?

For more: the top reads of the week

Thanks for reading!

Miner hell

Miners of all shapes and sizes are screwed.  The combo of weak global growth, drek emerging markets, a decaying industry and an insanely strong dollar is killing them off slowly but surely.  The market action is starting to reflect a new leg lower.  

Platinum and Palladium miner Stillwater is breaking a gradual 3 year support.  If it loses that October low 11.80, look out below

Copper is no better apparently as we saw an aggressive put buyer bought ~30K or so May 15 puts for ~.40 cents.  They see FCX below 14.60 in 2 months...YO!  Here's a look at some of the action.

Here's a look at the chart.  Keep in mind these puts are beyond the earnings cycle.

While the immediate term might not be so damning, the picture over the coming weeks and months is looking pretty dire.  Trade 'em smart!

Thanks for reading!

Telsa looking dire

A couple of weeks ago I pointed out some positives for Tesla in the chart and news flow.  Now things have changed and price is confirming it's trend lower.  For a quick review...

Back in December, Tesla formed a head and shoulders top.  Then, post earnings, a possible head and shoulders bottom setup morphed into a symmetrical triangle.  This pattern is starting to break down and it screams caution from the long side.

This pattern after 'the' (reversal) pattern is a strong signal that a new trend is developing.  In this case, it's lower.

Now on the open, the market has lost it's horizontal support and a sharp break lower may be under way.  It's prudent to respect your stops!

Trade 'em well and thanks for reading!