Weekly Market Preview

Hey, I hope you had a great trading week catching some of the monster moves in Biotech.  There was plenty of broad market skepticism out there most of the week, but the confluence of news and sentiment allowed being very aggressive in biotech to pay big.  

Quick summary:  

• Underlying signs of caution are building in the ratio charts, but there is nothing worth acting on yet

• Gold and Bonds are at the beginning of a move that will shock or frustrate most

• There are still plenty of places that look ripe for long trades/investment, although there are fewer fresh setups this week.

• The international equity picture has improved notably over the last week or so (this may be largely due to currency movements)

Broad market

Let's start this week with some classic Dow Theory.  The transports reached new bull market highs led by trucking and airlines while industrials lagged.  This is worth keeping an eye on if the market were to have a key reversal day lower in the near term.

The Advance Decline line is leading the market higher, suggesting we aren't near an important top.  For those new to technicals, breadth leading the market is one the of the most important tenants in technical analysis.  

This TLT chart is primed to move higher.  The move in bonds is widespread.  Breakouts occurred last week in LQD, AGG, TIP, MUB, PFF, HYD

Utilities, REITs, (not shown) and gold miners are perking up and offering a confirmation of sorts for the falling rates watch.

Some miners to watch - NG, SLW, NEM, AEM

Healthcare/ pharma is another defensive group with a market relative breakout.  This alone is worthy of concern, but these hints are adding up.



The TED spread is showing signs of perking up.  This supports the safety trade, especially if it takes out the October highs.
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Stock/group trade ideas:

SOIL, the fertilizer ETF, has broken out of a month long head and shoulders bottom.  Look to some of the funds top holdings like POT for strength next week.

This VIMC is a chinese semi play.  A beautiful head and shoulders bottom breakout now forming a symmetrical triangle.  It wants to trade into the 5's.

While retail is having blow ups across the space, there are still some stocks looking pretty good such as TJX and UA.  Check out the quality base formed in VRA.  Over 25-26 would launch this thing.  You'd have to use a wide stop.

Get yourself some exposure to these building material names.  If Buffett finds value here...there's significant value here.  USG is a beaut technically as well

SLCA, a frac sand play, is at key support in this wedge with positive momentum.  It's offering a good swing long entry here with a stop under 30.50 with targets around the upper resistance line at 35.5 and a move above that to 40.

MWW is bull flagging after a major base breakout.  The current risk in a long swing is about 4% with potential upside of 30%.

Earnings season picks up speed this week with many large financial institutions reporting.
          Other companies of interest reporting: WEN, CSX, INTC, SLB

Don't forget about the Needham Growth Conference this week.  They have a bunch of great companies lined up, and I'll be filing some reviews on EXTR, NMRX and SNMX next week.

Have a great week!
- Aaron

Reviewing last week's market wrap

Reviewing last week's Market Wrap:

The UNG short term H&S top completed and shed weight quickly.

Two key trade ideas mentioned last week:  EEM and KO. 

EEM probed through the whole support zone and didn't offer a trade until Friday.  I'm moving on from this one with the 200D just above.

KO bounced Tuesday and cratered until the 200D SMA test Thursday.  This bounce has legs imo and it's best to play long near dated calls.

Things worth watching still in progress: 

LGIH - recent housing IPO could explode when the group is ready fot the next leg up. Exhibiting relative strength.

QUNR - just a monster shakeout?  Holding a higher low thus far

Aussie Dollar - still forming a monster double bottom??

Others: GTX, DBA, DBB

Last Week's performance via Finviz.com

Post Holiday Catch-up

Quick summary:

• While the market has been down the first two days of the year, there are underlying signs of strength in stocks

• Either the whole global growth thesis is going to get blown out of the water soon, or this is setting up on a tee for fresh longs to step in.  

International

EEM, ILF, EWZ have sold off hard into critical support.  EEM is a favorite idea for a long trade.

Other international ETF's at support: Malaysia, So. Korea,, Phillipenes.

International ETF's leading to the downside: Turkey, Thailand.

Two leaders are emerging in emerging markets:  The middle east via MES and possibly Singapore.

The Singapore iShares is getting deep in the apex.  Which was is this going to break?

Equities

While the market sold off end of the week, breadth is outperforming price as shown in the NYSE advance/decline line

The market shows it's strength in sell-offs.  Note the improved relative strength of financials, housing and transports on these down days.

The Philly Shipping index has formed a huge cup and is working on a handle now.  Buy 'em

Oil producers and explorers MAY be finishing short term bottoms offering excellent swing longs.

The cloud computing ETF is a helluva nice bull flag into the 10D SMA.  

Other industry groups holding above the 10 day moving averages:  building materials, coal, steel, asset managers, semi's, rails, publishing, aerospace, big data

Soft drinks index has pulled in hard to the rising 50D.  I'm looking at Feb call buys in KO and front week ATM put spread writes on further weakness.

The Australian Dollar appears to be bottoming

The IPO index is holding over the 10D.  This itself is not a good play, but it's a risk-on signal in the recent IPO space.  Some names of note: AERI, CUDA, LGIH, QUNR, OXFD, RLYP, MEP


Commodities:

Nat Gas may be forming a short term head and shoulders top at key resistance.  UNG feb puts is how I'd like to play it.

 The Goldman Commodity index is VERY compressed from a long term standpoint.  It got smoked last week.  An outsized move is coming soon.

 This is a great spot to try long trades in DBA

Keep an eye on the 10 week moving average in DBB and GYX

Let's have a great trading week!!

Chart porn

Some MACRO charts of note

Gulf States - Basically a middle east ETF.  for more details click here

Gasoline - a small bull H&S has broken out as it makes a run at key trendlines above.

CRB Index - regained a key support line.  This adds a lot of significance to the line.  Taper signaling a decent inflation rate ahead??

Groups to watch

GEX - alternative energy with a spectacular consolidation.  This includes solars and things like CREE, TSLA

XNG - nice push past resistance.  An explosive look.  here's a link to the components 

SOCL - a great cup with handle look while relative strength has already broken out

Fresh setups, hot breakouts


HBIO - a small biotech breaking a MASSIVE base  A double> triple+ over time?  My favorite fresh breakout out there and it's not close.

HIL - theres a great swing long opportunity here

EGAN - a winning net stock in 2013 has dipped under the 200D.  A strong move over has our interest versus channel lows

SFY- breakout re-test

 CLFD - Networking is picking it up in a big way of late.  No sellers in this stock all year.  A top pick here

AL - the aero cycle is in full force.  This has based nicely after the IPO breakout offering a low risk speculation point for longer term players.

 MWW - small staffing stocks are going CRAZY of late.  This fresh breakout targets 9

 NAT - the shippers have been big gainers, this is one of the best set up charts in the group.  This should see 10 quickly.  Probably has much more in it.

 MTW - I love the tight coil break here.  I own it and am looking for a 30's in 2014.

 JNS - hot group, won't be shocked if this trades 20 a year from now

 CPE - The dip has been bought.  Looks ready to test the recent highs and could lead to much more upside

DSPG - leaving a 4 year base in a big way, likely has at least 35% upside left

 BZH - breaking a 4 year gradual resistance line; this is poised for major gains as are others in the housing sector (hov, spf to name a couple)

MLNX - appears to be turning the corner exiting this long term falling wedge.

INSM - a key bounce at support this week.  This all coming at a major breakout point.