Gio's Market Rundown

We all know what happened this week – “HISTORIC DAY” they called it on CNBC. This poster sums it up via @Stocktwits

Last week (Dec 14-18), I focused on FEAR and how to measure it. Bottles popped and the “Santa Rally” cries were deafening as the $NDX reversed +4.7% from Monday’s low to Thursday’s open.  Sellers took total control at that point

The end result? Price took a 360 turn and all major indexes closed the week printing inverted candles below major weekly moving averages.

$NDX finisihed the week -0.92% and closed under the 10wma (4605) for a 2nd consecutive week, losing upward trend. More worrrisome, the $NDX ( as well as the $SPX) has printed 3 consecutive lower weekly closes. Support now @ 4470

$SPX closed the week under the 10/20/30/40 wmas. As stated last week, the rejection of the 10/40 bullish cross @ 2060 is a major concern and confirms the trend points LOWER at the moment.  

Taking another step back, the $SPX monthly chart has lost its 10 & 20 averages (2042 & 2020). It is extremely important to note two things in this chart:

1. Losing the 10/20 monthly avgs was only the beginning of the market crashes in 2000 and 2008.
2. The exception was the 2011 drawdown, in which price “played” with the middle Bolli for 5 months before resolving higher. 2015 is now in month #5

In summary, my POINTS OF CONCERN:

1. $SPX rejection of bullish 10/40 cross @ 2060. Remember this number as it may prove to be major resistance
2. $NDX lost rising trend by closing under 10wma (4605)
3. Given price reversal, the path of least resistance is lower. weekly Bollis retest = $NDX -8.8% / $SPX -4.8%
4. Per price action, reaction to Fed announcement was a textbook bull trap. Euphoria right into and right after event to get the dumb money excited … just for the smart money to sell the news a day later
5. $SPX monthly chart continues to deteriorate, displaying signs common of major market drawdowns

OK so charts took a major hit this week. But this post can’t be all negative. Below are some POSSIBLE POSITIVES to be discussed individually in detail below

1. Daily $NDX (and $SPX) chart closed the week at lower Bolli, could be a nice spot for a short term bounce
2. Seasonality favors upward trend starting Dec 15 into end of year
3. $WTIC (Crude Oil) is 1pt away from its largest decline ever of -68% – cheap gas!
4. As/If the $NAA50R approaches 20% (Nasdaq  % of Stocks Above 50dma), we will have an excellent market entry
5. Yellen and Shkreli Memes!

#1) $NDX Friday candle closed outside the daily bolli. Unless Monday brings absolute panic ala August, we could bounce here. For now, I don’t think a repeat of August happens here given Friday’s options expiration and seaosnality. Watch out for a possible bounce and follow through on Monday

#2) $SPX average return in Dec. (1990-2014) bottoms on 12/15 and a rallies into tear-end. (Data source: Yahoo Finance)

#3) Charlie Bilello (@MktOutperform) reminds us the largest $WTIC decline EVER was -68% (2009) while current decline is at -67%. I indeed think we make a new record in the low 70s. However, I expect a mean reversion afterwards which could provide a major headwind to $SPX $NDX price action in early 2016

#4) Gotta be patient with $NAA50R – wait for 20% and below to start thinking about loading the boat

FINAL THOUGHT

Allow me to be crystal clear – As long as the $NDX and $SPX trade under their 10 & 40 weekly moving averages, I am inclined to think a new bear market is starting. Until then, any bounces are treated as short term trading opportunities. The positives above will all need to confirm before going long again with a short timeframe in mind. I DO NOT recommend immidiately shorting the market due to possible support at lower bollinger bands on indexes. Best move right to start new positions:

New Longs  – wait for indexes to close over 5ema ($NDX = 4580 / $SPX = 2033)

New Shorts – Good shot at another rejection from $SPX 2060 and $NDX 4600. Both could be major resistance

As always, thank you for reading. Trade ‘em well – Gio

And now, the best Yellen memes found on @Stocktwits this week!

Opportunity in Master Limited Partnerships

I'm looking into the MLPs this week.  Why?

Simply put, this is a time where the actual valuation of the businesses is superseded by fear and other considerations.

We've just seen a major panic in energy stocks and in particular Kinder Morgan.  It's no longer an MLP, but it's still the largest psychological anchor of the group.  Also, we're in the middle of tax loss selling season.   

It's worth looking for some bounce trades in MLP stocks as they test panic lows areas.   

Wall St. Jesus noted some large put selling in AMLP earlier this week:

$AMLP 5X NORMAL VOLUME TODAY, LED BY HUGE JAN PUT SELLING

— JE$US (@WallStJesus) December 15, 2015

Here's a list of AMLP's holdings

Here's a look at the daily charts via FinViz

Like at most bottoms, there isn't much to be excited about technically.  Frankly, the ETF AMLP might just be the best play for traders.

Disclosure:  I have a long position in KMI at the time of posting.

Trade 'em well!

The Carrion Weekly Outlook

Gio is at it again with another with another great market outlook post! Show him some support, the blogging community would be lucky to have his insights!

This is it! All those GDP revisions, job numbers and Yellen’s data dependency measures have led us here – the week the Fed will raise interest rates. Whether that’s a bad/good idea it’s up to smarter macro folks than I. All we can focus us on is how to trade during a news driven week.

Last week (12/7-12/11) was firmly characterized by one word – FEAR. Here’s how the indexes performed

$SPX closed the week at 2,012, undercutting a rising 10wma and a flat 40wma while negating a bullish cross of the latter two averages. Adittionally, an 8-week range of ~80pts (purple box) was pierced to the downside. Red flags everywhere.

Crude Oil ($WTIC) continued to dominate headlines and added to panic on Friday as it had its lowest weekly close since June 2014. This decline is now -67%. Last week, we discussed the largest decline stands at -68% (2009)

Question arises then – how do we measure fear? The quick on the draw will point you to $VIX, up 58% in 5 days

If I had to “teach” you about the $VIX, it would be two things:

1. In a rising market, the VIX tends revert when outside it’s daily Bollinger band
2. When FEAR takes over, #1 goes out the window

Given #1, last Friday was the first “oversold” signal for all major indexes. However, #2 is a major call for caution. During the Aug 2015 decline, the VIX exploded +300% in 4 days ($NDX -12%). We all took a hit during those 4 infamous days. Is there a better way to measure fear then? For me, yes there is.

$NAA50R – Nasdaq Percent of Stocks Above 50 Day Moving Average

The $NAA50R is the ultimate combo measure of market “breadth” and fear. It quantifibly depicts not only the overall market trend but also the severeness of market sell-offs. Since Dec 1st, this metric has declined from 65% to the current 33% in a virtual straight line. However, it’s not all negative. This chart has been helpful determining execellent entry points in the market while the rest is stuck to the CNBC screens.

The following two points will be my sole focus this week:

1. The daily RSI for $NAA50R rarely goes under 30. It stands at 31.6 right now – another “oversold” signal. I am watching for a sub 30 reading or any bounce attempts
2. Major market bottoms in the last 20 years were all marked by $NAA50R hitting 20% or below. (I welcome you to back test this as good charting practice). We stand at 33% right now. Amind, Oil, Junk Bonds and Rate Hike noise, I am blindly focusing on this metric if it approaches the 20% mark

I’ve intentionally left out individual stock picks on this post. It is not prudent to advice buying on this week ahead. Focus on tools that give you the most edge. For me, measuring Fear is the best way. Trade ‘em well and thank you for reading!

Burrito Psyche 101

Chipotle's CEO finally came out to the public to talk about the E. coli breakout.  The stock is really moving.

Shares are rallying hard today.  Let's think about what this interview signals.  Chipotle has been relatively quiet about this.  Why?  Well maybe they just didn't have all the facts.

The market has sniffed out they waited until they fully comprehended and solved any issues that might of caused this.  This is clear.

From Business Insider's recap of CEO Steve Ells' Today Show appearance:

These are great answers.  They're great for a short term pop and short squeeze.  They're great for long term investors.  However, is a warm and cuddly tv interview going to convince you to go Chipotle any time soon?  The issue remains...


Trade 'em well!

Disclosure:  I have no position

Fresh Blood: A market update

I reached out to my friend Gianfranco Carrion to try to get him blogging.  He's a talented chartist with awesome market insights.  Luckily, he agreed.  Let's show him some support for this awesome piece of research he put together!  

Here I go, first blog post ever. Thank you for your viewership.

I may be able to anticipate your first question: “Who is this dude and why should I continue reading?” The answer to that question and some others about my background are at the bottom of this post for those interested.

I do wish to share the purpose of my writing. When I began learning about the market years ago, I could noticeably identify two distinct target audiences for financial media:

1. The market veterans who jump right into complicated technical and fundamental facts
2. The novice readers who seek to make sense of the never-ending noise and fluctuations of the market

With this blog, I aim to close such gap. I intend to share material that speaks to both groups alike. With luck, my writing will make some money for members in both groups.

Now, a few disclaimers and assumptions:

• I ‘m first and foremost a technical analyst. I’m all about CHARTS at all timeframes. You will not find wordy fundamental stories on this blog
• I do understand there are fundamental forces affecting the market. I just chose to decipher them via charts
• Very few stocks trade in a bubble. If you can’t chart market direction ($NDX, $SPX, $RUT) and have a plan for it, the odds are stacked highly against you.
• You’ve heard it and it’s true: The market takes the “staircase up, elevator down”
• I assume readers have an understanding of basic technical analysis tools. I mostly use: Simple moving averages, 5-day exponential moving average, Bollinger bands and RSI
• I keep charts simple. Keep the Fibs, Ichimoku Clouds, Keltner Channels, etc in the closet
• I defined trends (up or down) as price being above/below it’s 5-day exponential moving average. That simple
• My motto: “Chart first, think later. Always tune out the noise”

Ok enough words…On to the charts. Let’s be very clear about where we are in this current bull market

Zooming in, we are only -3% away from the $SPX all-time highs (2,126.64). Sure doesn’t feel like it, doesn’t it?

So much NOISE hitting CNBC news wires last few days. Below is a summary of “reasons” for declines in last 5 days. Yet, $SPY has moved in a 2.8% range. Do you go long now? NO. I rarely go long when price is under 5ema. Support stands at 50dma at 204.99 (-0.95%)

Focusing on the last reason for sell-off, $OIL is in the gutter. There’s so much noise from CNBC and other “pros” calling for $20 crude. That tells me fear is hitting the street and makes me think the bottom is near. Take notice $USO reversals in 2015 were all marked by HUGE daily candles. First huge squeeze day tends to follow through – keep a close watch

Charlie Bilello shared the largest Crude Oil declines in History via @Stocktwits  (Lowest -68%).  Current decline at -65%

In summary:

• $SPX is below a declining 5ema
• $SPX -3% away from all-time highs
• Rate Hike, European Central Bank and Oil price headlines are clouding wild price swings
• Oil in the middle of a historic decline (-65%) – wait on first squeeze reversal
• December 16 Rate Hike looms in the background

So, what do I like in this environment? The last standing soldier is the technology space, which has been able to fend off the Oil decline pressure better than industrials and non-tech large caps

Note the $NDX (Nasdaq 100) is still holding its 5ema (4,686.97) and forming a base in a 2.9% range. We want to see a decisive breakout above 4,700 to project upside on a longer timeframe

Am I telling to go buy your preferred tech stock? No, to the novice investor. The best move right now is to wait for a new market trend to develop after the news event on December 16.  However, there indeed are some names within tech that call my attention, such as $SWKS and $ATVI

$SWKS @ 87.1 / Stop $85 (-2.4%)

Skyworks looks attractive after downtrend breakout. Looks poised as a good swing over 20dma

$ATVI @ 39.36 / Stop $38.3 (-2.7%)

Activision now over 37.8 and still in a strong uptrend. Ride trend over 37.8. Stop tighter than usual given environment

In a “NO CHASE” tape, I tend to visualize market trends at longer than usual timeframe. I’d like to close with one final crazy thought. Given extreme sell-off in crude and horrible sentiment in space, one of two scenarios is near:

1. Either the energy sector ($XLE) implodes and is probably the trigger for the next bear market
2. Crude ($WTIC) “magically” reverses, forcing energy sector to bounce w/ force, finally propping $SPX into new highs. For this, the dollar ($UUP) will need to cool or lose uptrend

Well, big bets = big $. At the moment, I’m much inclined to think the bottom in oil is a couple of points away. Look for possible reversal signs discussed earlier in this document. Until then, I’m keeping stops tighter than usual with a 100% focus on tech space. Thank you for reading. Trade ‘em well - Gio

Since June 2014

$UUP +22% $WTIC -65% $XLE -36% $SPY +5%

More about Gianfranco: Q & A Session

1. Who are you and why should I listen?

My name is Gianfranco, a 27 year-old Financial Analyst from Atlanta. My true passion is asset management; further, as investors/traders, you and I share the common interest of making money playing this game. I seek to share my ideas in order to spread the knowledge and wealth with anyone who cares to read

2. Are you experienced?

I’ve been actively investing in the market since early 2013 (man what a good year that was!). Ever since, I’ve spent every waking second learning how to chart stocks and studying every movement in the market, current and past.

3. What are you offering?

I offer my ideas about market direction expressed in CHARTS. Personally, I trade market direction via ETFs the mosts. I do play individual stocks when market conditions alow for longer swings; however, that has not been the case since late 2014.

4. Who do you look up to as an investor?

One can say I’m a new age trader. Reading “Insider Buy Superstocks” by Jesse Stine was the reason that turned me into an active trader. I believe the rise of High Frequency Trading has changed the rules of the game and that mirroring techniques from 50 years ago have little profit for me. I try to understand and beat the machines via tech analysis

5. How do I contact you?

I more than welcome interaction via my Stocktwits account: @gianfranco18 – talk to you soon

Thanks for reading!