Trading Journal 1/29/14

Today the broader market continued to the downside likely due to continued concern about potential emerging market currency crises and the Fed deciding to taper another $10 billion of their bond purchasing program. Somebody mustn’t have relayed the message to the bond traders correctly because the long end of the curve continued to rally in price, pushing yields down as it has since early January. The VIX rallied on the gap down, closing up ten percent on the day but off the highs as it struggled with resistance in the 18 area. Most of the major indices are approaching, or have already tested their 100 day EMAs as well as prior breakout areas. Many sectors are closing in on support and nearing oversold readings as well, which leads me to think that we will likely see a bounce by the end of the week. I’d say downside at this point, depending on what major index or sector you are looking at, is limited to another 1-2% at least in the short term. Whether this pullback is the start of a larger correction has yet to be seen as the bounce, or lack thereof, that we get will tell us where we may be headed next. In addition, many world stock markets are approaching support levels and oversold conditions as well, which will provide momentum in US markets if they can trade green in the overnight session. Lastly, it seems like many area talking about USD/JPY needing to hold 102, which it continues to hold at the moment, with 101.60 being 100 day EMA support below that area. Leaders on the day included gold miners (GDX), basic materials (XLB), utilities (XLU), and Bonds (TLT). Laggards included solar names(TAN), regional banks (KRE), the retail sector (XRT), consumer staples (XLP), gaming stocks (BJK), and consumer discretionary (XLY). As you can see, consumer names have struggled as of late, and they continue to struggle in their attempt to find some footing, likely because of the weaker macro data and earnings reports we’ve had thus far. In the commodity space natural gas goes squirrel again closing up nearly 10% on the day, although recent momentum divergences on the daily could lead to it taking a pause. Doesn’t mean its a short though, just an observation, it could very well continue higher after a few days of consolidation. Gold struggles with resistance at 1275, while silver continues its drift lower, looking to test the lows near 19. Crude oil continues to flag and will likely run with a break of 98 on the upside. Cocoa and oats also continued higher after their respective breakouts. In the currency market AUD/USD failed at .885 resistance as discussed, EUR/USD and GBP/USD continue to consolidate their earlier moves and USD/JPY continues to hold support and build a base above 102. Expect some volatility in the next two days as we get some macro data from the US and overseas, but overall I think we should start to base and move higher into next week. Stay small and know your stops until we get a decisive, directional move, as risk can and does happen fast. Just my .02. GL all.

VIX

USD JPY

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Trading Journal 1/28/14

Today the major indices began day one of the expected bounce at major areas of support and are experiencing some follow through in the AH session on the back of Turkey’s overnight interest rate increase.The market exhibited some resilience as the Nasdaq 100 held support despite weakness in AAPL throughout the session. The VIX confirmed downside today with a bearish marubozu candle confirming the shooting star candle from Monday. 15-15.20 should be some support as the short term moving averages attempt to catch up to price. Leaders on the day included solar stocks(TAN) on the back of a positive note on SCTY from Goldman Sachs, gold miners (GDX), large cap biotech (IBB), steel names (SLX), and homebuilders (XHB). Laggards on the day included the Nasdaq 100 which closed flat, largely due to AAPL’s 8% decline, oil service names (OIH,PXJ), regional banks (KRE), retail stocks(XRT), and telecom (XTL). AAPL suppliers also came under pressure today due to the disappointing earnings report the company posted after the bell yesterday. In the commodity space Crude continues to show strength as it flags and builds an upper level base while heating oil continues to the upside. Cocoa futures also broke out above their recent range as well today while Oats futures continued higher after Monday’s breakout of a two week trading range. In the currency market AUD/USD is retesting the prior breakdown area of .885 as discussed in last nights post with USD/JPY exhibiting similar action after finding support at the 100 day. As you might imagine USD/TRY fell off a cliff on the back of the interest rate increase by the central bank there and downside continues as I type this. Not one I follow often but support at 2.14, 2.10, 2.077. I’d say there is a long bias in US equities as we remain near key support but risk has happened fast the past week so be aware of where your exit is going to be and what areas you need to adjust exposure at, if you are an active trader of course. Will try to post some setups tomorrow morning before class.

Trading Journal 1/27/14

Markets attempted to bounce in the overnight session at one point being up nearly half a percentage point, only to be met by selling pressure as we approached the open of the cash session. The major indices have approached and held the support levels talked about in my prior posts and are nearing oversold levels in momentum readings. We will likely see a bounce or some basing action around these levels as the risk to the downside until next major support is less than 1% below where we closed today. Though we may see some early weakness especially in tech due to the sell-off in AAPL after hours. Leaders on the day included solar names (TAN), gaming stocks (BJK), aerospace/defense names (PPA), utilities(XLU) and the industrial sector (XLI) on the back of CAT’s gap higher on earnings. Leaders to the downside included gold miners (GDX), large cap biotech (IBB), small caps (IWM), regional banks (KRE), and tech (QQQ/SMH). In the commodity space gold struggled at the 1275 resistance level and pulled back while natural gas printed a nasty topping tail above $5.44 and closed just off the lows at 4.89. Oats futures continue to show strength and look to be breaking out above the recent flag highs as I type this. Heating oil, crude and gasoline futures pulling back off their highs as well to test support at rising short term EMAs. In the currency market AUD/USD is rallying as it will likely test the prior breakdown area and falling 21 day EMA in the .882-.885 area. EUR/USD continues to consolidate, looks like it wants to move higher. GBP/USD looking to retest the 1.665 area after retesting its wedge breakout area, see if it can break through this time. USD/JPY looks to be bear flagging above the 100 day EMA with falling 8/13/21 day EMA resistance coming into play soon. Sorry no actionable setups today, school is back and I gotta be up in five hours. Look for names/sectors showing relative strength and put on some “feeler” longs as we approach major support and oversold readings.

Weekly Charts 1/26/14

XRT/SPY testing an important level here. A break could signal further under-performance by the retail sector.

XRT/SPY testing an important level here. A break could signal further under-performance by the retail sector.

AUD/USD making new lows, short below this week's low against the breakdown area of .885. Momentum divergences not ready to play out yet.

AUD/USD making new lows, short below this week’s low against the breakdown area of .885. Momentum divergences not ready to play out yet.

BJK sector has been on fire but immediate term momentum broken with this week's bear engulfing candle that took out 6 weeks of gains. Support 48.50, 46.50, 44.90.

BJK sector has been on fire but immediate term momentum broken with this week’s bear engulfing candle that took out 6 weeks of gains. Support 48.50, 46.50, 44.90.

DIA breaking multiple levels of support. Should find some footing between this week's low at the 21 week MA and 156.50, the prior breakout area.

DIA breaking multiple levels of support. Should find some footing between this week’s low at the 21 week MA and 156.50, the prior breakout area.

ECH making new lows. Stay away on the long side until we see any sort of reversal candle. Short below today's low though it is in oversold territory.

ECH making new lows. Stay away on the long side until we see any sort of reversal candle. Short below today’s low though it is in oversold territory.

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Market Breadth 1/26/14

This week the US equity market’s experienced their first real move to the downside of 2014. With that came some good and bad signs in terms of market breadth. The good news is that the short term indicators like put/call ratios, TICK, the arms index (TRIN), and the VIX have moved off their lows and out of the complacency zone for the time being. That being said, longer term breadth measures continue to lag. Whether or not this is the start of a larger correction has yet to be determined but some clear divergences continue and have become clearer than ever given recent price action. Two separate measures, stocks in the S&P 500 above their 50 day moving average, and stocks in the S&P 500 above their 200 day moving average declined sharply and broke support on this sell-off despite the realization that we are less than 4% off the highs. This confirms the earlier concern that higher highs in price are being reached on the back of fewer and fewer stocks participating; a trend that is clearly not sustainable longer term. Similar divergences exist in the same measures looking at the NYSE, again an unsustainable trend in the longer term. The advance-decline issues and volume indices for the NYSE continue to improve and should remain strong above their prior breakout areas shown on the charts below. In the short term put/call ratios and the elevation of the VIX and arms index signal that we may see a bounce or some consolidation early in this week as many of the major indices come into areas of support. It will be important on the retracement to see if we can regain our footing in terms of stocks above their short and long term trends (above 50/200 day moving averages). If this pullback is held to the typical <5% moves that we saw all of 2013 and we attempt new highs, we will definitely need to see these divergences resolve to the upside if we want any sort of sustainability of trend to the upside.

$CPCE

 $CPC

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