Rotation Report: Bear Press

Hopefully everybody enjoyed the long weekend!  Damn, the good times always go too fast don't they?

Be sure to check out my favorite reads of the week over at See It Market.

A major fibonacci level stalled out the S&P 500's breakout.  That's a big concern until it's taken out.

It's also been one hell of a stock pickers market as the chaser's playbook is working well.  Here's a quick overview of at what i'm looking at this week.

Biotech is testing key resistance as it's formed a descending channel pattern.  

Treasuries look ready to bounce and seem to be a top theme into this week

Emerging Market Bonds have held up damn well and are currently finding buyers over an important pivot level.

Real Estate is strengthening at the 200 MA.

 Financials have broken to 52 week highs.  Again momentum is weak but maybe it's just temporary as the market works itself out.

Overseas

For the first time in weeks Hong Kong followed Shanghai higher Friday.  That's a big signal in my book.  EWH broke a continuation triangle higher Friday.

Russia looks broken and could be great a short up here.

Other Markets

Various Base metals are testing bounce levels.  Copper is testing the rising 50 day moving average.

The Dollar is really strengthening, but the Euro and Aussie dollar (not shown) set to test key support early in the week.

Trade 'em well!

Analyzing the IPO ETF

Some ETFs can provide valuable information about how various market groups are trading.  Digging through the holdings and structures can provide us with plenty of information.  Let's take a look at the IPO ETF for example.  I thought 'hey this would be a great proxy or tell for the recent IPO space'.  Sadly, that's not the case.

Here are top holdings of the IPO ETF.

It's highly weighted in higher market capitalization names like Twitter and Alibaba, which are trading poorly.

Here's a look at IPO's chart

The price action in the ETF is misleading and is not indicative of the trading opportunity or price action in the group.  Things like FRPT, SHAK, AMBA, DATA, JD, MBLY, ADPT are just smothered by the weighting system.

Was IPO was just constructed to be a just another motif for advisers to pitch?  Maybe, I doubt it, but who knows.  The fund's construction methodology is just not conducive for us to measure the true activity of recently IPO'd stocks

Full disclosure: i'm long DATA and SHAK

Trade 'em well!

The chasers playbook

Judging by the sentiment polls, there are a lot of traders and investors not long enough.  I've been one of them(more on that in a later post).  What if the skepticism is wrong?  It's certainly looking that way more all the time.  Here's a basic list of what I look for when it's time to hammer down on the long side with some current examples.  Full Disclosure i'm long DATA and SHAK at the time of posting.

Mid-cap growth leaders:  The cloud and data storage continues to be a leading trend with great price action across the group.  Recently DATA broke a one year base on a large earnings gap and appears headed much higher.  So we've got a in a great group.  Last quarter the revenues grew 75%!

The hot china internet stocks:  QUNR failed to break the 20 day MA and has traded in this range after doubling.

Highly Doubted Low Float Growth Story:  Shake Shak is a highly doubted, low float growth story that's just caught fire.  The daily chart is pretty rough looking, but intra-day is showing a monstrous triangle continuation pattern.

Aaand of course there's the highly visible momentum rally.  After a two week consolidation PTBI is breaking out

Trade 'em well!

Fib day

We're set up to test the 161.8 fib extension of the financial crisis range today.  Depending on data, the actual level is somewhere in the next half percent.  I've seen 2130, 2138, 2136.  Whatcha got bulls?

Rotation Report: Palindrome syndrome

palindrome - a word, phrase, number, or other sequence of characters which reads the same backward or forward.  via wikipedia

It's only fitting that in the midst of palindrome week, the market maintains a bid off recession-like economic data.   No matter how you read it, apparently it's good news.  Check out @MishGEA's take on the consumer after this week's retail sales.  I'm no fundamentalist, but I respect Mish's work and noting this as he speaks up. Also, @EddyElfenbien notes industrial production fell for the fifth straight month.  

Alas, the market is not the economy!  Let's dig in!

Flows and Internals

Checking in on the NYSE dashboard we see a slight divergence in the A/D lines and volume.  It's a concern that may setup for a false breakout or moderate correction, but really it's not a huge divergence like seen at say the 2007 market top.

SPXEW continues to under-perform SPX.   This is not a good look as we hit new all time highs. 

The most recent example of the market advancing with lagging breadth was last September leading into the 'Fearbola' pullback.  

The stock to bond ratio broke key resistance after a sharp run.  It's worth eyeing for the next couple of weeks for follow through.  Keep in mind this is just one of many measures that are testing key levels.  Also a breakout doesn't mean stocks have to go up, but it's quite the potential tailwind.  Perhaps it could support a rally although breadth is thinning.

High yield stocks are once again trading lock step with long term treasuries.  It's like they aren't viewed as fundamental businesses, they're viewed as tools to achieve desired portfolio yields.

Groups

What's been evident across the market is patient buyers and sellers are both happy in what still appears to be a range-bound market.

I explained why i'm not a big fan of financials here.  Show me something other than JP Morgan hitting new highs.  That plus group breadth is still lacking in a similar fashion to the overall market. 

Agribusiness continues to lead.  I called out some of the better looking Ag names in the group Tuesday.  

The transports via IYT caused a big scare mid-week, mainly because of the rails, which carry an unusually heavy weight in the index.  It's amazing how this thing keeps bouncing at support, but of course it's causing a notable divergence with the dow industrials .  

Consumer Staples surged strongly at the end of the week and may set up a price and relative strength breakout.

Health care and the Semi's via SOX (not shown) broke 2 touch descending trendlines, but still are still working through horizontal resistance.  

Bonds

We're in a yield hungry world filled with underfunded pensions.  Speaking to that point, it appears that's related to the recent out-performance of high yield bonds relative to treasuries, bunds etc.  Perhaps when treasury yields are too low, money flows to the more acceptable yields.  These ratios sure haven't been a risk-on, risk-off indicator over the last year or so.

Bonds from TLT to LQD ended the week breaking sharp short term downtrends after flashing divergences at lows.  120 in LQD could be an interesting area to get short.  Check out @jbeckinvest's post noting evidence of steepening yield curves.

Overseas

Global Markets in 2015 are still not a U.S. based story as the S&P 500 reverses much of last years gains relative to the world.

Emerging Asia has found many buyers at the 10 week MA the last couple of weeks.  Heck the whole emerging markets space is intriguing.  

Taiwan echo's that sentiment as it bases over the prior 10 month base.

Top Site hits of the of the week

My favorite links compiled over at See It Market

Biotech testing the most important level in the chart

12 Trading Thoughts

A short term hidden danger in solar ETFs

Lessons learned from years on twitter and stocktwits

Fallen Angels

The Sleeping Giant

Psyche

A few points worth noting: 

All week the bears glopped onto any weakness they saw and continually were steamrolled.  Stocks are in fine shape until that changes.

It seems like a lot of the biggest upside moves are coming off news and rumors.  The gut reaction has been to fade them and it's also not working.  

Range-bound characteristics are still shining in the stock market and leads us to still favor bounce trades over breakout trades.  

Be wary of the fear of missing out.  If/when we break the range higher, it's coming.  Particularly with sentiment polls showing decreasing levels of bulls.  

Select growth stocks are seeing some incredible action.  They're more rare these days so they stand out and lead to faster/stronger moves.  One current example is AMBA (no position).

It pays to know the time-frames of the folks you follow on social.  

Trade 'em well!