What we're playing for

This monster base break in IPHI is what we play for.  While the market weakens it's trading sideways..  Maybe we get an opportunity to buy in the 16's.  Maybe not.  Keep an eye on it.  For now, it's too stretched short term IMO.

Trade 'em well!

Rotation Report: New Year, New Game?

Happy New Year!  Thanks to you all for reading, sharing and help craft this weekly letter.  Hopefully we all have a healthy and prosperous 2015.  I'll do my part by continually evolving this weekly post by cutting the fat of excess charts and trying to add helpful commentary.

The market rotation picture is similar to that of a few weeks ago.  The same tech/biotech/consumer groups are leading, with signs of fresh defensive relative strength continuing to emerge.

The action in some growth names like BABA, MBLY, AMZN and GOOGL is a cause for caution.  This beautiful price structure and breakout in LifeLock got hit by an 18 wheeler Friday.

One can argue it's company specific, but it's never a good sign when a clean price structure in a leading group gets wrecked like that.

Many quality names are still above their rising 50D MA's, but we aren't at quality buying points.  On Friday I wrote about the small caps mini breakout.  It appears we've seen a classic front-running of the January effect.  We'll see how sentiment unfolds with further price weakness and go from there.

Let's dig in...

The U.S. Dollar continues it's unrelenting rally.  It's amazing how little resistance the 2009 and 2010 high have been

The Euro via FXE is at 9 year lows.  Again, it's quite telling how this has ignored various support levels on the drop.  The next ECB meeting is January 22nd.  Is the market just telling us a hail mary, mother of all QE's is coming?

It was an INSANE week in the German 10 year Bunds as the yield dropped 7.5%!  

In the last month alone the yield has dropped over 30%!   It seems like only a matter of time before US Treasuries follow it lower.

US industry groups:

Consumer discretionary relative strength is still being halted by this pivot line.  That's surely no reason to sell your retail stocks, but the slam-dunk phase of the consumer rally might be over.

Looking at the consumer dashboard we see Apple's relative strength continues to fall off.  Maybe it's company specific?  The necessity plays still have a strong look.

...Or maybe not.  We saw a nasty weekly reversal in the Personal Products index at the breakout area.

The homebuilders have stalled out multiple times at price and relative strength resistance recently, while lagging the market in the most recent rally.  That's not a bullish combo!

At the same time REITs are attempting to flex their muscle.  Some of the better multi month setups I see are in this group.  My list includes: SBRA, CDR, HT, APTS, MNR. PDM among others.  

REITs relative to tech are also reaching a critical turning point.

Last week I wrote about the Utilities RS break out.  Now we have a backtest of the key level

Energy has barely sold-off and it's already at the key support zone.  Risk reward is still extremely attractive on the long side.

Cloud computing ETF SKYY is re-testing a key pivot.  I'm searching this group for buy points.

This gigantic wedge in the internet index will be a big clue about technology's prospects this year.

Finally, a few weeks back I mentioned the bullish outside week in DBA.  It's actually broken down and is approaching a full retrace of the spring 2014 move.  Incredible!

Cotton (BAL) and sugar (SGG) have traded near major support areas for some time and there are few signs of life. 

 It's also worth noting wheat and corn are still showing some signs of strength noted a few weeks back.

Thanks for reading, trade 'em well!

Market History: Russian Ruble Crisis

With emerging market credit spreads widening and signs of a desire for 'safe' assets showing up everywhere, I thought it'd be worth looking back at the Ruble crisis.

After Russia defaulted, unsurprisingly the market dropped.  Interestingly safe assets like Utilities ran higher.  The run lasted 2 months or so while the market hammered out it's bottom.  As we approached the default event, the utilities advance quickly became highly correlated with the drop in long term treasury rates.  Treasury yields had already been falling and their drop accelerated immediately after the default

For more reading on the crisis check this out

Trade 'em well

Breakout of the year

It seems like every market pundit and their mother has watched the small caps as they've budged over the highs of the year.  Not surprisingly, small caps are probably the most popular bullish new years pick out there.  Could the crowd be wrong?  Let's take a look.

Relative strength is in a horizontal resistance zone, but it appears more out-performance of larger cap indices is continuing.  At the same time, we see the small caps ETF IWM reversing at the boundary line connecting the two prior peaks.

Who knows if the boundary will hold or if this is just a speed bump,  The question here is how much of a pullback it would take for cynicism to go through the roof.  A push lower into the newly rising moving averages might just do the trick.

Trade 'em well!

A floor in Natural Gas?

Natural Gas has cratered this month, but we finally have some signs of a floor.  

This 3.10-3.15 level has been a pivot for years with numerous tests.  Given the significance of the level, odds are this footing holds to either build a base or start a corrective rally

If this level gives out and we move lower, there aren’t a lot of clear support levels on the chart. 

We see price is stretched on the daily with price 6-7% below the 10D MA as it's broken Friday's inside day higher.  

The shorter intraday trend has turned higher with Monday’s rally.

Upside Fibonacci levels appear roughly every 10 cents with the major resistance area at 3.60.  

Again, it’s looking quite possible that we’ve seen a momentum overshoot of this support zone.  Even with Monday's rally it appears there is still good risk-reward for a swing trade long on any minor dip.

Trade 'em well!

I have a position in the long nat gas ETF UGAZ