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Thursday, February 25, 2016
Tuesday, July 28, 2015
Tuesday, July 21, 2015
Tuesday, July 07, 2015
Monday, July 06, 2015
Tuesday, June 23, 2015
Monday, June 22, 2015
Monday, June 01, 2015
Growth Stocks Setup As Market Searches For Direction
Despite the threat of higher interest rates, bad geopolitical news, and heavy stalling and professional selling every time the market nears fifty two week highs, the market continues make higher lows and inch towards fifty two week highs.
Price volume action among Leading Growth Stocks has been much stronger then recent attempts to rally...volume is stronger and heavy on breakouts, stocks are actually following through and hold up exceptionally well during high volume market market stalling/distributions days, and new setups are ready to breakout. Quite a few from earlier stage, tighter consolidations. Exactly the type of action bullish traders want to see.
$PSXP, $EQM, $CMGE, $MDXG, and $BOFI have formed cup and handle bases, and $LXFT, $JD, $BXMT, $TSEM, $AER, and $ATHM are attempting to bounce off or near their fifty day moving averages.
$SYNA, $SWKS, $AVGO, $GTN, $SHLX, $TNK, $SEDG, and $ACT are following through on recent high volume breakouts.
Traders need to be long or considering getting long. The windows of opportunity during recent rally attempts, to enter a profitable trade, have been very small. Even if this turns out to be another fake rally attempt, the good news is that if the market isn't headed for a bear market, only a major correction, leading growth stocks do breakout of first stage bases and continue higher or form second consolidations as the market corrects. Later stage breakouts should be trailed with tighter stops and sold into major strength. Otherwise, stops should protect the trader's capital.
Random Musing
All of these breakouts and setups have been on the leading growth stocks analysis list for weeks. Click to review them now, and review them often.
Price volume action among Leading Growth Stocks has been much stronger then recent attempts to rally...volume is stronger and heavy on breakouts, stocks are actually following through and hold up exceptionally well during high volume market market stalling/distributions days, and new setups are ready to breakout. Quite a few from earlier stage, tighter consolidations. Exactly the type of action bullish traders want to see.
$PSXP, $EQM, $CMGE, $MDXG, and $BOFI have formed cup and handle bases, and $LXFT, $JD, $BXMT, $TSEM, $AER, and $ATHM are attempting to bounce off or near their fifty day moving averages.
$SYNA, $SWKS, $AVGO, $GTN, $SHLX, $TNK, $SEDG, and $ACT are following through on recent high volume breakouts.
Traders need to be long or considering getting long. The windows of opportunity during recent rally attempts, to enter a profitable trade, have been very small. Even if this turns out to be another fake rally attempt, the good news is that if the market isn't headed for a bear market, only a major correction, leading growth stocks do breakout of first stage bases and continue higher or form second consolidations as the market corrects. Later stage breakouts should be trailed with tighter stops and sold into major strength. Otherwise, stops should protect the trader's capital.
Random Musing
All of these breakouts and setups have been on the leading growth stocks analysis list for weeks. Click to review them now, and review them often.
Wednesday, May 27, 2015
Thursday, May 21, 2015
Monday, May 04, 2015
Tight Market Plagued By Red Flags
Every market attempt to new highs has been plagued by distribution. The Nasdaq and SP 500 have registered five distribution days over the last three weeks, and the DOW six. Volume over the last five months has clearly picked up on sell offs and barely registers a pulse on up days. Yet the market has failed to follow through to the downside despite the heavy overall distribution and stalling action. About the only good news, the market hasn't sold off either, but that could just be a matter of time.
Leading growth stocks held up well over the last few months until the current earning's season. Biogen (BIIB), Twitter (TWTR), LinkedIn (LNKD), and Harman (HAR) were hammered on earning's reports, Apple (AAPL) and Facebook (FB) reversed in heavy volume below their fifty day moving averages. None of the stocks have been able to muster any type of recovery.
The majority of other leading growth stocks are still holding strong, but cannot manage to follow through when the market does rally. Even strong breakouts like Amazon (AMZN) and Netflix (NFLX) have failed to follow through past their breakout days. Netflix has shuffled sideways (NFLX) while Amazon (AMZN) has backtracked significantly.
There are still some pockets of strength that should be monitored especially in the Media sector. Nexstar Broadcasting (NXST), Sinclair Broadcast (SBGI), Gray Television (GTN), are forming first stage, flat bases on top cup and handle bases, New Media (NEWM) is forming a second stage cup shaped base, Media General is forming a first stage cup and handle base, and AMC Networks (AMCX) continues to move higher after breaking out of a first stage cup and handle base in January.
Nothing would please me more then too be a flat out bull. Unfortunately, despite the market's inability to sell off in the face of bad news, there is very little evidence that the market is headed much higher, and plenty of evidence that a major correction is looming.
In my opinion, the market still has its eye on the prize, closing above the Nasdaq's all time high of 5,132.52, but that is probably as high as it is going to get without any significant follow through by the market's leading growth stocks.
Leading growth stocks held up well over the last few months until the current earning's season. Biogen (BIIB), Twitter (TWTR), LinkedIn (LNKD), and Harman (HAR) were hammered on earning's reports, Apple (AAPL) and Facebook (FB) reversed in heavy volume below their fifty day moving averages. None of the stocks have been able to muster any type of recovery.
The majority of other leading growth stocks are still holding strong, but cannot manage to follow through when the market does rally. Even strong breakouts like Amazon (AMZN) and Netflix (NFLX) have failed to follow through past their breakout days. Netflix has shuffled sideways (NFLX) while Amazon (AMZN) has backtracked significantly.
There are still some pockets of strength that should be monitored especially in the Media sector. Nexstar Broadcasting (NXST), Sinclair Broadcast (SBGI), Gray Television (GTN), are forming first stage, flat bases on top cup and handle bases, New Media (NEWM) is forming a second stage cup shaped base, Media General is forming a first stage cup and handle base, and AMC Networks (AMCX) continues to move higher after breaking out of a first stage cup and handle base in January.
Nothing would please me more then too be a flat out bull. Unfortunately, despite the market's inability to sell off in the face of bad news, there is very little evidence that the market is headed much higher, and plenty of evidence that a major correction is looming.
In my opinion, the market still has its eye on the prize, closing above the Nasdaq's all time high of 5,132.52, but that is probably as high as it is going to get without any significant follow through by the market's leading growth stocks.
Monday, April 20, 2015
Leading Growth Stocks Tightening Ahead of Next Move Higher
Traders have had a tough go of it over the last few months as every rally has been short lived with little follow through. But leading growth stocks have remained stubborn despite the numerous red flags in the market, mainly the high distribution count. There are many leading growth stocks that have tightened up ahead of their earning's reports and are ready to bounce off moving averages and breakout out of bases.
LinkedIn (LNKD) has been forming a flat base, after gaping out, in heavy volume, out of a first stage, cup and handle base in February, on a strong earning's report.
Apple (AAPL) has been tightening up into the fifty day moving average ahead of its earning's report next Monday.
Twitter (TWTR) has pulled back to the twenty day moving average after breaking out, in heavy volume, out of a first stage, cup and handle base in March.
Mallinckrodt (MNK) has tightened up into the fifty day moving average ahead of its earning's report May 5th.
Nexstar Broadcasting (NXST) is forming a first stage, flat base on top of a cup and handle base, ahead of its earning's report May 7th, and Sinclair Broadcasting (SBGI) has tightened up into the twenty day moving average after breaking out in March, in heavy volume, ahead of its earning's report May 6th.
Netease (NTES) attempted to breakout of a cup shaped base two weeks ago in heavy volume and is currently putting on a high handle to the cup shaped base.
SolarCity (SCTY) is forming a cup shaped base ahead if its earning's report May 6th, along with First Solar (FSLR) and Canadian Solar (CSIQ) forming first stage, cup and handle bases.
With so many leading growth stocks tightening up into earning's reports, and Netflix (NFLX) gaping out in strong volume on its earning's report and following through in a sideways market, it is time to start getting aggressive on the long side.
Review the leading growth stocks analysis for more setups, and there are plenty of them. Adjust positions for added risk, since the market's red flags cannot be ignored.
PS
Checkout the new site, DividendBreakouts.com, for stocks with high yields breaking out of early stage bases. Sign up for free breakout alerts.
LinkedIn (LNKD) has been forming a flat base, after gaping out, in heavy volume, out of a first stage, cup and handle base in February, on a strong earning's report.
Apple (AAPL) has been tightening up into the fifty day moving average ahead of its earning's report next Monday.
Twitter (TWTR) has pulled back to the twenty day moving average after breaking out, in heavy volume, out of a first stage, cup and handle base in March.
Mallinckrodt (MNK) has tightened up into the fifty day moving average ahead of its earning's report May 5th.
Nexstar Broadcasting (NXST) is forming a first stage, flat base on top of a cup and handle base, ahead of its earning's report May 7th, and Sinclair Broadcasting (SBGI) has tightened up into the twenty day moving average after breaking out in March, in heavy volume, ahead of its earning's report May 6th.
Netease (NTES) attempted to breakout of a cup shaped base two weeks ago in heavy volume and is currently putting on a high handle to the cup shaped base.
SolarCity (SCTY) is forming a cup shaped base ahead if its earning's report May 6th, along with First Solar (FSLR) and Canadian Solar (CSIQ) forming first stage, cup and handle bases.
With so many leading growth stocks tightening up into earning's reports, and Netflix (NFLX) gaping out in strong volume on its earning's report and following through in a sideways market, it is time to start getting aggressive on the long side.
Review the leading growth stocks analysis for more setups, and there are plenty of them. Adjust positions for added risk, since the market's red flags cannot be ignored.
PS
Checkout the new site, DividendBreakouts.com, for stocks with high yields breaking out of early stage bases. Sign up for free breakout alerts.
Friday, March 06, 2015
Price Action Impressive Volume Not So Much
Market price action has been impressive by any respect. Despite persistent bad news from around the world, and numerous internal red flags, the NYSE advance decline line continues to trade near new highs, and the market marches higher almost unabated. Unfortunately, that's where the good news ends, as it has for the past few short lived rally attempts.
The Nasdaq advance decline line didn't confirm the rally, fell short of its November high, and hasn't confirmed any rally since March 2014. If the NYSE advance decline acted similarly, along with the fact that the Dow Jones Transportation Index has not confirmed any new Dow highs since the end of November, the probabilities of a bear market over a major market correction would increase dramatically.
Volume has not confirmed the rally. Over the last eight days, including today, Friday, the NASDAQ has registered four distribution type days, and the SP 500 and Dow Jones Industrial Averages, three apiece. And over the last four months, the majority of the highest volume days have been stalling or full blow distribution type days. Most of the up days have come on below average volume, and when the volume is higher, it is generally during stalling periods.
A narrow group of leading growth stocks have acted especially well. Breakouts were in above average volume, they followed through almost immediately in strong volume, and have held tight during recent market distribution. But many broke out of late stage bases and have exhibited climactic action. Many others are speculative stocks in biotech and semi conductors, running on take over speculation. It's never a good sign when the market has run out of quality stocks to buy and needs to rummage through the dustbin for "good" ideas.
Short trading ideas have started breaking down, especially in oil related names. Many more short trading ideas are tightening and others continue to quiet down. A market squeeze attempt over the next few days, in low volume, and little back tracking by recent breakdowns, would setup the ideal shorting scenario. In the meantime, a few short positions in stocks that have already tightened and are breaking down, should be taken.
There are two events on Monday that could trigger a sell the news reaction over the next few days. Apple (AAPL) is unveiling its smart watch. Expectations are high. And the ECB starts their QE bond buying program. Unlike when the FED announced US QE and the market initially reacted positively, only to sell off into the start of the bond buying program, the market has actually rallied into the bond buying program, instead of selling off.
This market has been difficult to navigate as an intermediate trend trader. Intermediate trends have been too short, lasting only two to four weeks on average, and unraveling within days, sometimes hours. The majority of trading setups fail to follow through, and sometimes round trip down to the stop, same day. The little, the winners that follow through move, barely covers, if lucky, the losses attempting to get into winning positions.
Rough trading environments come and go...in market years it feels like a decade. Traders that preserve their capital the most, will survive to enjoy the next big trend. Just don't be scared when the time comes.
The Nasdaq advance decline line didn't confirm the rally, fell short of its November high, and hasn't confirmed any rally since March 2014. If the NYSE advance decline acted similarly, along with the fact that the Dow Jones Transportation Index has not confirmed any new Dow highs since the end of November, the probabilities of a bear market over a major market correction would increase dramatically.
A narrow group of leading growth stocks have acted especially well. Breakouts were in above average volume, they followed through almost immediately in strong volume, and have held tight during recent market distribution. But many broke out of late stage bases and have exhibited climactic action. Many others are speculative stocks in biotech and semi conductors, running on take over speculation. It's never a good sign when the market has run out of quality stocks to buy and needs to rummage through the dustbin for "good" ideas.
Short trading ideas have started breaking down, especially in oil related names. Many more short trading ideas are tightening and others continue to quiet down. A market squeeze attempt over the next few days, in low volume, and little back tracking by recent breakdowns, would setup the ideal shorting scenario. In the meantime, a few short positions in stocks that have already tightened and are breaking down, should be taken.
There are two events on Monday that could trigger a sell the news reaction over the next few days. Apple (AAPL) is unveiling its smart watch. Expectations are high. And the ECB starts their QE bond buying program. Unlike when the FED announced US QE and the market initially reacted positively, only to sell off into the start of the bond buying program, the market has actually rallied into the bond buying program, instead of selling off.
This market has been difficult to navigate as an intermediate trend trader. Intermediate trends have been too short, lasting only two to four weeks on average, and unraveling within days, sometimes hours. The majority of trading setups fail to follow through, and sometimes round trip down to the stop, same day. The little, the winners that follow through move, barely covers, if lucky, the losses attempting to get into winning positions.
Rough trading environments come and go...in market years it feels like a decade. Traders that preserve their capital the most, will survive to enjoy the next big trend. Just don't be scared when the time comes.
Thursday, February 05, 2015
Rally Attempt In Trouble As Countless Major Red Flags Litter The Market
On the surface it could be said that the market appears bullish. Considering all the bad geopolitical news that keeps worsening with every news report, the market has barely budged to the downside and is sitting in a fairly tight range. But that is where all the good news ends.
Over almost the last two months, volume has been running well above average almost daily. The majority of those above average days have been distribution days. The few accumulation days that the market has mustered, volume never traded higher then the major distribution days, and over that time, the Nasdaq and SP 500 have registered 12 and 10 distribution days, respectively, verses four accumulation days, that were immediately undercut over the next few days.
The VIX, a measure of day to day volatility, has not fallen back as much as it did during the last few rally attempts, showing nervousness continues growing even as the market seems to hold up. Intra day volatility is completely out of control with the market ranging over 1 - 2% on many days. Not the type of action typically witnessed during strong rallies, and more indicative of growing uncertainty that generally precedes major corrections or bear markets.
Leading growth stocks are behaving poorly. Major market leaders, Chipotle Mexican Grill (CMG) and Gilead Sciences (GILD), are breaking down or falling apart, and Apple (AAPL), Biogen Idec (BIIB), and Facebook (FB), reported strong earnings but have struggled to make further progress while the market has pushed relentlessly higher for the past four days. Even shorter term trade setups are failing to make any progress, or at least enough to offset losses in losers. This is a strong indication that leading growth stocks should be avoided for the time being. They need quite some time to reset and tighten their consolidations before being considered for a longer term trade.
Short trading ideas are squeezing along with the market, but the majority have not fallen apart and continue to try and tighten up around low risk entry points. Short trading ideas need to be reviewed daily and considered for entry as they start to roll over, since the early movers tend to be the easiest to handle. And with the recent history this market has with rolling over suddenly and not looking back, the early birds really do get the worm.
Casino stocks, Wynn Resorts (WYNN) and Las Vegas Sand (LVS) have pulled back to their fifty day moving averages and getting closer to breaking down. Baidu (BIDU) and Autohome (ATHM) have ignored the market rally attempt and held tight in sideway consolidation within a downtrend. Ready to continue lower as the market rolls over or begins to stall.
Stay prepared and don't wait for too much confirmation. There's plenty of it already. Short trading ideas rolling over and following through will be the death of this latest rally attempt and potentially the start of the next leg of this correction.
Right now these are the facts on the ground. The few pieces of good news or big movers are over shadowed by the bad news and failing leading growth stocks. The market is clearly trying to paint the surface in gold to fool the most amount of traders and investors, but underneath the foundation is shaky looking for a reason to buckle. Keep stops tight if your long or risk major losses in positions with small losses or gains.
Over almost the last two months, volume has been running well above average almost daily. The majority of those above average days have been distribution days. The few accumulation days that the market has mustered, volume never traded higher then the major distribution days, and over that time, the Nasdaq and SP 500 have registered 12 and 10 distribution days, respectively, verses four accumulation days, that were immediately undercut over the next few days.
The VIX, a measure of day to day volatility, has not fallen back as much as it did during the last few rally attempts, showing nervousness continues growing even as the market seems to hold up. Intra day volatility is completely out of control with the market ranging over 1 - 2% on many days. Not the type of action typically witnessed during strong rallies, and more indicative of growing uncertainty that generally precedes major corrections or bear markets.
Leading growth stocks are behaving poorly. Major market leaders, Chipotle Mexican Grill (CMG) and Gilead Sciences (GILD), are breaking down or falling apart, and Apple (AAPL), Biogen Idec (BIIB), and Facebook (FB), reported strong earnings but have struggled to make further progress while the market has pushed relentlessly higher for the past four days. Even shorter term trade setups are failing to make any progress, or at least enough to offset losses in losers. This is a strong indication that leading growth stocks should be avoided for the time being. They need quite some time to reset and tighten their consolidations before being considered for a longer term trade.
Short trading ideas are squeezing along with the market, but the majority have not fallen apart and continue to try and tighten up around low risk entry points. Short trading ideas need to be reviewed daily and considered for entry as they start to roll over, since the early movers tend to be the easiest to handle. And with the recent history this market has with rolling over suddenly and not looking back, the early birds really do get the worm.
Casino stocks, Wynn Resorts (WYNN) and Las Vegas Sand (LVS) have pulled back to their fifty day moving averages and getting closer to breaking down. Baidu (BIDU) and Autohome (ATHM) have ignored the market rally attempt and held tight in sideway consolidation within a downtrend. Ready to continue lower as the market rolls over or begins to stall.
Stay prepared and don't wait for too much confirmation. There's plenty of it already. Short trading ideas rolling over and following through will be the death of this latest rally attempt and potentially the start of the next leg of this correction.
Right now these are the facts on the ground. The few pieces of good news or big movers are over shadowed by the bad news and failing leading growth stocks. The market is clearly trying to paint the surface in gold to fool the most amount of traders and investors, but underneath the foundation is shaky looking for a reason to buckle. Keep stops tight if your long or risk major losses in positions with small losses or gains.
Wednesday, February 04, 2015
Gold and Miners Readying To Breakout Into ECB QE
Gold has been trading inversely to the US stock market for several weeks now, intra-day and daily. A weakening US dollar and anticipation of the ECB quantitative easing program starting, could prove bullish for gold over at least the next month or two. This would most likely coincide with a correction in the US stock market.
In, Gold Silver Ready To Follow Oil and Gas Collapse, I wrote that gold, silver, and related miners were ready to rollover. At the time, December 23, 2014, the commodity and related miners were consolidating in traditional short setups, but those fell up apart as quickly as I wrote the article.
Instead of breaking down, they broke out over their respective fifty day moving averages and rallied nearer to their fifty two week highs over the last five to six weeks.
The good news, the majority of the short setups would not have trapped traders into a trade, as the majority did not attempt to breakdown. Those that did attempt to breakdown, would have had tight stops and traders would have lost very little.
Currently, gold and related miners have been consolidating in cup and handle bases. Ideally, they will sell off/shake out, four to five percent more, over the next week or two, and setup a lower risk, higher probability trade.
Since the market doesn't typically do what I like, the current entry would be a breakout above handle highs. Gold (GLD), Hecla Mining (HL), Rangold Resources (GOLD), Royal Gold (RGLD), Barrick Gold (ABX), and Newmont Minding (NEM), are forming cup and handle bases, with solid accumulation patterns and shook out under cut multi-year lows last year and early this year. Without the shakeout in the handle, the trade might be difficult to handle.
In, Gold Silver Ready To Follow Oil and Gas Collapse, I wrote that gold, silver, and related miners were ready to rollover. At the time, December 23, 2014, the commodity and related miners were consolidating in traditional short setups, but those fell up apart as quickly as I wrote the article.
Instead of breaking down, they broke out over their respective fifty day moving averages and rallied nearer to their fifty two week highs over the last five to six weeks.
The good news, the majority of the short setups would not have trapped traders into a trade, as the majority did not attempt to breakdown. Those that did attempt to breakdown, would have had tight stops and traders would have lost very little.
Currently, gold and related miners have been consolidating in cup and handle bases. Ideally, they will sell off/shake out, four to five percent more, over the next week or two, and setup a lower risk, higher probability trade.
Since the market doesn't typically do what I like, the current entry would be a breakout above handle highs. Gold (GLD), Hecla Mining (HL), Rangold Resources (GOLD), Royal Gold (RGLD), Barrick Gold (ABX), and Newmont Minding (NEM), are forming cup and handle bases, with solid accumulation patterns and shook out under cut multi-year lows last year and early this year. Without the shakeout in the handle, the trade might be difficult to handle.
Tuesday, January 27, 2015
While Traders Play Investors Should Stay Away
The current rally in the indices is no different then any other rally we have seen over the past few months. Just as a correction starts to take hold and spooks everyone, the market manages to grip onto several pieces of good news and suddenly rally without much warning. But with every rally attempt, while the indices seem fine, the internals continue to deteriorate.
The ECB quantitative easing program was clearly the catalyst for the current rally as the market started to anticipate its announcement about a week before. Unfortunately, we have to ask ourselves how bad are things really that the ECB has to step in?
The hope from the ECB announcement on Wall and Main Street seems to be that the FED will possibly delay raising interest rates and even potentially reactivate QE. Of course this is not the case as the FED is intent, despite potentially deflationary reading in CPI and PPI over the next few months because of the plunge in oil and gas prices, to try and get ahead of any inflationary pressure or asset bubbles that could arise from such a prolonged period of low interest rates and enormous money printing. The FED will stay the course and start raising rates by the middle of the year, if not as early as March or April, to try and get ahead of the US election in 2016. The FED normally tries to avoid changes in monetary policy ahead of elections to try and appear neutral, and has only a limited window to do so before election season goes into full swing.
The VIX drops quickly with every rally attempt, but continues to make higher lows over the last few months. A strong indication that nervousness is building in the market, while complacency seems to set in real quick with every rally attempt. The buy the dip mentality is firmly in place and the perfect bull trap.
Leading growth stocks look awful. With every rally attempt, the number of stocks able to make any progress diminishes, with this one being particularly very narrow...under a dozen stocks, if that much. The majority of the good, trade able moves occurred in stocks that were reporting over the last two weeks and bouncing off bottoms, not breaking out to new highs, and most needed to be sold before the actual report. Otherwise there was almost no participation to the upside by the strongest stocks that managed to buck the previous pullback in the market. Any stocks that did manage to breakout did so in anemic volume, with little follow through, and diminishing volume as they climbed. The remainder of the consolidations are late stage, wide and loose bases with lagging relative strength.
Medical stocks have led the market for quite sometime but most seem to be asleep while handful are still making progress but are too over extended to chase. Actavis (ACT), Incyte (INCY), and Pharmacyclics (PCYC) broke out to new highs, but ACT and INCY breakouts were in anemic volume. Apple (AAPL) and Microsoft (MSFT) bounced nicely off their bottoms, but stalled around their fifty day moving averages. Apple reports tonight and could be a catalyst to lift the market for a day or two, but MSFT was down over 10% on its earning's report.
Short trading ideas worked very well at the beginning of January, but forced traders to cover them last week as the market turned. Most of the profits could have been booked quite easily by alert traders. The short trading ideas list is still littered with stocks that are pulling back to moving averages to digest previous sell offs and new setups are getting ready to rollover. Not the type of action that would be present if the market were truly getting ready to lift off on a big move.
3D systems (DDD), Gerdau S.A. (GGB), Ford Motor (F), and Juniper Networks (JNPR) are all rolling over near or at their fifty day moving averages, with plenty of others waiting in the wings.
I started to alert traders on Twitter and StockTwits Tuesday, January 20th, that short positions needed to be tightened up to protect profits and minimize losses in new positions, and that several large capitalization technology and medical stocks could run into their earning's reports. Which is exactly what has occurred. At this point, many of these stocks should have been sold before their actual earning's reports, and many others are now starting to trigger tighter stops reducing long exposure to the market.
Traders can continue to hold the few stocks that are acting well still moving into their earning's reports, but should continue to trail a tight stop to protect profits and minimize losses on new positions. Traders should not initiate any new positions on the long side as recent setups have gotten wilder, failing to follow through, triggering tight stops very quickly, and are now lagging a strong move by the indices. A recipe that has been deadly over the past few months for anyone over staying their welcome. Continue to monitor the short trading ideas list for entries too.
We've entered the period where late traders are at risk of being chopped to death while the market, once again, begins to setup another pullback that should turn into a major correction. This has been the theme for the last few months and many hecklers point out how wrong it has been. But, even the buy and hold crowd has not made any progress over the last few months, and would be better served on a long vacation until the market manages a major correction. The easy money has been made, and now the market is in the hands of the traders. So while the traders play, investors should stay away.
The ECB quantitative easing program was clearly the catalyst for the current rally as the market started to anticipate its announcement about a week before. Unfortunately, we have to ask ourselves how bad are things really that the ECB has to step in?
The hope from the ECB announcement on Wall and Main Street seems to be that the FED will possibly delay raising interest rates and even potentially reactivate QE. Of course this is not the case as the FED is intent, despite potentially deflationary reading in CPI and PPI over the next few months because of the plunge in oil and gas prices, to try and get ahead of any inflationary pressure or asset bubbles that could arise from such a prolonged period of low interest rates and enormous money printing. The FED will stay the course and start raising rates by the middle of the year, if not as early as March or April, to try and get ahead of the US election in 2016. The FED normally tries to avoid changes in monetary policy ahead of elections to try and appear neutral, and has only a limited window to do so before election season goes into full swing.
The VIX drops quickly with every rally attempt, but continues to make higher lows over the last few months. A strong indication that nervousness is building in the market, while complacency seems to set in real quick with every rally attempt. The buy the dip mentality is firmly in place and the perfect bull trap.
Leading growth stocks look awful. With every rally attempt, the number of stocks able to make any progress diminishes, with this one being particularly very narrow...under a dozen stocks, if that much. The majority of the good, trade able moves occurred in stocks that were reporting over the last two weeks and bouncing off bottoms, not breaking out to new highs, and most needed to be sold before the actual report. Otherwise there was almost no participation to the upside by the strongest stocks that managed to buck the previous pullback in the market. Any stocks that did manage to breakout did so in anemic volume, with little follow through, and diminishing volume as they climbed. The remainder of the consolidations are late stage, wide and loose bases with lagging relative strength.
Medical stocks have led the market for quite sometime but most seem to be asleep while handful are still making progress but are too over extended to chase. Actavis (ACT), Incyte (INCY), and Pharmacyclics (PCYC) broke out to new highs, but ACT and INCY breakouts were in anemic volume. Apple (AAPL) and Microsoft (MSFT) bounced nicely off their bottoms, but stalled around their fifty day moving averages. Apple reports tonight and could be a catalyst to lift the market for a day or two, but MSFT was down over 10% on its earning's report.
Short trading ideas worked very well at the beginning of January, but forced traders to cover them last week as the market turned. Most of the profits could have been booked quite easily by alert traders. The short trading ideas list is still littered with stocks that are pulling back to moving averages to digest previous sell offs and new setups are getting ready to rollover. Not the type of action that would be present if the market were truly getting ready to lift off on a big move.
3D systems (DDD), Gerdau S.A. (GGB), Ford Motor (F), and Juniper Networks (JNPR) are all rolling over near or at their fifty day moving averages, with plenty of others waiting in the wings.
I started to alert traders on Twitter and StockTwits Tuesday, January 20th, that short positions needed to be tightened up to protect profits and minimize losses in new positions, and that several large capitalization technology and medical stocks could run into their earning's reports. Which is exactly what has occurred. At this point, many of these stocks should have been sold before their actual earning's reports, and many others are now starting to trigger tighter stops reducing long exposure to the market.
Traders can continue to hold the few stocks that are acting well still moving into their earning's reports, but should continue to trail a tight stop to protect profits and minimize losses on new positions. Traders should not initiate any new positions on the long side as recent setups have gotten wilder, failing to follow through, triggering tight stops very quickly, and are now lagging a strong move by the indices. A recipe that has been deadly over the past few months for anyone over staying their welcome. Continue to monitor the short trading ideas list for entries too.
We've entered the period where late traders are at risk of being chopped to death while the market, once again, begins to setup another pullback that should turn into a major correction. This has been the theme for the last few months and many hecklers point out how wrong it has been. But, even the buy and hold crowd has not made any progress over the last few months, and would be better served on a long vacation until the market manages a major correction. The easy money has been made, and now the market is in the hands of the traders. So while the traders play, investors should stay away.
Wednesday, January 07, 2015
Why Today's Rally Is Nothing More Then A Short Squeeze
After suffering four to six straight distribution days, slicing through their fifty day moving averages in above average volume, and getting a bit over extended, the Nasdaq, SP 500, and DOW, naturally needed to consolidate their losses. Heading into the close, all three indices were trading up over one percent, but volume has been drying up as the day has progressed.
The VIX spiked over fifty percent during the sell off and continued its pattern of higher lows even as the market made new highs. A clear sign that while the markets were luring traders into complacency, anxiety has been slowly rising, and spiking with every pulback, despite the markets ability to make new highs, quickly, after every pullback.
The short trading ideas list is littered with strong downside follow through and new setups tightening as the market squeezes. Nimble traders who started shorting as short setups started to rollover last Friday and over the last two days, are sitting on comfortable profits even after today's short squeeze. It is hard to find a single short setups from Friday or Monday that has fallen apart or is currently threatening to fall apart. The majority are tightening to resume their downtrends once market selling pressure resumes.
Activision Blizzard (ATVI), Terex (TEX), and Priceline (PCLN) continue to follow through to the downisde, while stocks like Advance Micro Devices (AMD), Waddell & Reed (WDR), and Mattel (MAT), are holding tight near their respective fifty day moving averages ready to rollover.
Leading growth stocks continue to behave poorly. There are almost no long term setups, and the few short term setups that were available can't follow through and are stalling even as the market pushes higher during the day. Outside of a few stocks that could run into earnings, the long side needs to be avoided until there is at least some evidence that leading growth stocks are resisting downside market pressure and nearing breakouts on reversal days. None of this is happening in today's short squeeze.
Apple (AAPL), Baidu (BIDU), and Ali Baba (BABA), held up strongly yesterday and attempted to follow through at the open along with the market. But as the day has progressed, all three stocks have started to stall, even as the market continues to push into new intra-day highs.
Without any solid longer term setups, poor follow through by shorter term setups, weak volume on today's rally attempt, and short positions holding recent gains, the probability of a sustained rally is almost zero. The indices may continue to squeeze to their short term, ten and twenty day moving averages, but be on alert for stalling action as they do.
Traders should use any rally attempt to initiate new short positions or add on to existing short positions. Any long positions that might remain in a traders portfolio that is not reacting to today's rally attempt, should be sold.
The VIX spiked over fifty percent during the sell off and continued its pattern of higher lows even as the market made new highs. A clear sign that while the markets were luring traders into complacency, anxiety has been slowly rising, and spiking with every pulback, despite the markets ability to make new highs, quickly, after every pullback.
The short trading ideas list is littered with strong downside follow through and new setups tightening as the market squeezes. Nimble traders who started shorting as short setups started to rollover last Friday and over the last two days, are sitting on comfortable profits even after today's short squeeze. It is hard to find a single short setups from Friday or Monday that has fallen apart or is currently threatening to fall apart. The majority are tightening to resume their downtrends once market selling pressure resumes.
Activision Blizzard (ATVI), Terex (TEX), and Priceline (PCLN) continue to follow through to the downisde, while stocks like Advance Micro Devices (AMD), Waddell & Reed (WDR), and Mattel (MAT), are holding tight near their respective fifty day moving averages ready to rollover.
Leading growth stocks continue to behave poorly. There are almost no long term setups, and the few short term setups that were available can't follow through and are stalling even as the market pushes higher during the day. Outside of a few stocks that could run into earnings, the long side needs to be avoided until there is at least some evidence that leading growth stocks are resisting downside market pressure and nearing breakouts on reversal days. None of this is happening in today's short squeeze.
Apple (AAPL), Baidu (BIDU), and Ali Baba (BABA), held up strongly yesterday and attempted to follow through at the open along with the market. But as the day has progressed, all three stocks have started to stall, even as the market continues to push into new intra-day highs.
Without any solid longer term setups, poor follow through by shorter term setups, weak volume on today's rally attempt, and short positions holding recent gains, the probability of a sustained rally is almost zero. The indices may continue to squeeze to their short term, ten and twenty day moving averages, but be on alert for stalling action as they do.
Traders should use any rally attempt to initiate new short positions or add on to existing short positions. Any long positions that might remain in a traders portfolio that is not reacting to today's rally attempt, should be sold.
Monday, January 05, 2015
Fifth Straight Distribution Day Kills Rally Attempt
Going into Christmas, Santa delivered a rally, but not anything you wanted under the Christmas tree. Outside of the huge rally day on December 17th, the first day of the rally attempt, volume dried up, and the market began to stall as it approached new highs.
Over the past five days the Nasdaq has suffered five straight distribution days, including today, the SP 500 is working on its third straight distribution day, and the Dow Jones Industrial Average, the first to signal trouble ahead, has suffered five distribution days in the last six trading sessions.
Four to five distribution days in a two to three week time frame is enough to kill any rally attempt. But a cluster of distribution in a weeks time is a clear signal for investors and traders to clear out of the long side and consider shorting the weakest stocks in the market.
Leading growth stocks initially bounced and moved past their moving averages, but in anemic volume, and price performance lagged on a daily basis going into the end of the year, even as the market tried to push higher. Stocks like Apple (AAPL), Baidu (BIDU), and Ali Baba (BABA), appeared ready to run into their earning's reports after clearing or bouncing off their fifty day moving averages, but stalled almost immediately and started to drag the market lower daily, finally slicing back through their fifty day moving averages. The majority of other leading growth stocks barely reacted and lagged during the entire rally attempt. Not the type of action traders are looking for during a strong rally.
The market may still attempt to rally into earning's season, but any attempt will most likely be lead by a narrow group of growth stocks that are expected to deliver strong earnings. The remainder of leading growth stocks are going to need several weeks, if not months, to consolidate and digest the two year, almost unabated, bull run.
Four to five distribution days in a two to three week time frame is enough to kill any rally attempt. But a cluster of distribution in a weeks time is a clear signal for investors and traders to clear out of the long side and consider shorting the weakest stocks in the market.
Leading growth stocks initially bounced and moved past their moving averages, but in anemic volume, and price performance lagged on a daily basis going into the end of the year, even as the market tried to push higher. Stocks like Apple (AAPL), Baidu (BIDU), and Ali Baba (BABA), appeared ready to run into their earning's reports after clearing or bouncing off their fifty day moving averages, but stalled almost immediately and started to drag the market lower daily, finally slicing back through their fifty day moving averages. The majority of other leading growth stocks barely reacted and lagged during the entire rally attempt. Not the type of action traders are looking for during a strong rally.
Short trading ideas did a nice job tightening up into year end and began rolling over from their moving averages on Friday. Alert traders could have started initiating positions, and adding additional positions this morning on new setups. Foregin banks, UBS AG (OUBS), Credit Suisse Group (CS), and Deutsche Bank (DB), by far the weakest group, were the first to roll over. Continue to keep an eye on the gold (GLD) and silver (SLV) miners (DUST), as that trade is not completely dead yet. High end retailers Michael Kors (KORS) and Coach (COH) have also rolled over at key moving averages. Review the short trading ideas list for additional setups over the next few days.
Writing in my daily journal the same two statements on a daily basis, leading growth stocks lagging again and new setups trapping bulls in and triggering tight stop losses daily, most of the time in the same day, forced me to cash on December 31st, once several of my tighter stops to protect profits and control losses began to trigger. This is similar action we have experienced over the last few rally attempts where the market starts to kill traders by a death of a thousand cuts before rolling over into a new correction attempt.
Those who follow me on Twitter, StockTwits, SeekingAlpha, or LinkedIn, were alerted with the following post on December 31st: "Cash is the best position going into the New Year. Leading growth stocks behaving poorly."
Traders should be clearly out of any long positions, and investors can probably pack up their bags for a little while. In fact, long term investors could have spent the past few months on vacation.
The market may still attempt to rally into earning's season, but any attempt will most likely be lead by a narrow group of growth stocks that are expected to deliver strong earnings. The remainder of leading growth stocks are going to need several weeks, if not months, to consolidate and digest the two year, almost unabated, bull run.
Sunday, December 28, 2014
After A Choppy Year What To Expect Next
All year long, every time the market threatened to enter its first prolonged, deep correction, the market would stop on a dime, reverse, and run relentlessly back into new highs. Barely pausing to allow traders back into the market. And each time the market would make it back to new highs, leading growth stocks would start to stall and warn of another looming correction weeks before the market would actually rollover. Chopping hesitant traders to death.
Smart traders protected their portfolios rather then try and hold on in hopes of more upside after a prolonged bull run, and more and more bull market leadership climaxing, topping out, and failing to follow through to new highs with each successive high by the market.
So here we are at the end of the year, in the same place we have found ourselves so many times this year. The market rolled over at the beginning of December after several more bull market leading growth stocks climaxed and rolled over to slice their fifty day moving averages, only to reverse on December 17th, in massive volume, and run back to new highs within six days.
Once again, leading growth stocks that climaxed in the previous market move to new highs, have failed to follow the market higher, while a much narrower group of stocks, that have not crashed through their fifty day moving averages, stand ready to climax with this move back to new highs. The majority of these stocks are rising out of late stage, wide and loose consolidations, with lagging relative strength. And the the longer these stocks sit around in consolidations without breaking out to new highs, the more likely any breakout attempt will be a bull trap and fail, rather then follow through aggressively to new highs. A major red flag for the prolonged health of this leg of the bull market.
Shorting has not been any easier, except for in the commodities sectors. Oil, gas, gold, and silver related stocks have had several sustained down trends that nimble traders could have taken advantage of. The short trading ideas list, updated almost every week, has included dozens of these stocks throughout the year.
At this point, traders that reacted quickly with the last blog entry, Is a Christmas Rally Around The Corner, covered their short positions and avoided painful squeezes in the majority of these stocks, and are positioned long.
If not, as stated earlier, there are still some interesting trading setups in the leading growth stocks analysis list that have the potential to make big moves going into earnings or while the market is able to hold up. But keep in mind, the list is extremely narrow, and the few that have moved with the market have barely kept pace with rapid advance by the market since the December 17th bottom.
With all the major indices at or near all time highs, it would not be surprising if the bull market pushed ahead for another few weeks into earning's season. But with all the red flags that have existed for the past few months ever present, the market is clearly in a topping process that is taking longer then most traders and investors are used to. Traders should be on the lookout for further lagging action to aggressively tighten stops to protect profits and minimize losses on lagging positions.
Apple (AAPL) and Baidu (BIDU) are bouncing off their fifty day moving averages, Ali Baba (BABA) and Actavis (ACT) are attempting to bounce off their fifty day moving averages, Avago Techonologies (AVGO) has pulled back to the twenty day moving average and is three weeks tight, and Illumina (ILMN) is setup in a flat base on top of cup and double bottom handle.
The short side, except for a few stocks, needs time to tighten up after the major squeezes many of these stocks experienced recently. Until there is more distribution in the market, traders would be prudent to thread lightly on the short side.
Going into 2015 it is hard to predict a bear market is around the corner. The market rarely ever falls into a bear market without at least another major rally attempt to new highs.
With the third year of the presidential cycle historically bullish, it would not be surprising if the market fell into a multi-month, major correction, as we approach the Yellen "couple of meeting's" tightening schedule she alluded to at the last FED press conference (February or March). But the markets have historically only reacted negatively short term term as the FED begins its tightening cycle and continued to advance higher until the FED has raised rates at least several times.
In conclusion, based on historical precedents of the presidential cycle and FED tightening, I'm expecting the market to finish this rally at some point early next year and fall into a minimum of a 12 - 15% corrrection, to as much as 20% on forced liquidations. Resume the bull market for the remainder of 2015 and possibly 2016, at which point FED tightening and the Presidential race will take their toll on the market. With the Nasdaq so close to all time highs at 5,132.52, I would not be surprised if the market achieved this level before a bear market begins.
Of course the facts can change over that period and we will adjust our expectation accordingly. For now, we can only trade based on the facts that are currently present in front of us.
Good luck and happy new year if this turns out to be the last market update of the year.
Smart traders protected their portfolios rather then try and hold on in hopes of more upside after a prolonged bull run, and more and more bull market leadership climaxing, topping out, and failing to follow through to new highs with each successive high by the market.
So here we are at the end of the year, in the same place we have found ourselves so many times this year. The market rolled over at the beginning of December after several more bull market leading growth stocks climaxed and rolled over to slice their fifty day moving averages, only to reverse on December 17th, in massive volume, and run back to new highs within six days.
Once again, leading growth stocks that climaxed in the previous market move to new highs, have failed to follow the market higher, while a much narrower group of stocks, that have not crashed through their fifty day moving averages, stand ready to climax with this move back to new highs. The majority of these stocks are rising out of late stage, wide and loose consolidations, with lagging relative strength. And the the longer these stocks sit around in consolidations without breaking out to new highs, the more likely any breakout attempt will be a bull trap and fail, rather then follow through aggressively to new highs. A major red flag for the prolonged health of this leg of the bull market.
Shorting has not been any easier, except for in the commodities sectors. Oil, gas, gold, and silver related stocks have had several sustained down trends that nimble traders could have taken advantage of. The short trading ideas list, updated almost every week, has included dozens of these stocks throughout the year.
At this point, traders that reacted quickly with the last blog entry, Is a Christmas Rally Around The Corner, covered their short positions and avoided painful squeezes in the majority of these stocks, and are positioned long.
If not, as stated earlier, there are still some interesting trading setups in the leading growth stocks analysis list that have the potential to make big moves going into earnings or while the market is able to hold up. But keep in mind, the list is extremely narrow, and the few that have moved with the market have barely kept pace with rapid advance by the market since the December 17th bottom.
With all the major indices at or near all time highs, it would not be surprising if the bull market pushed ahead for another few weeks into earning's season. But with all the red flags that have existed for the past few months ever present, the market is clearly in a topping process that is taking longer then most traders and investors are used to. Traders should be on the lookout for further lagging action to aggressively tighten stops to protect profits and minimize losses on lagging positions.
Apple (AAPL) and Baidu (BIDU) are bouncing off their fifty day moving averages, Ali Baba (BABA) and Actavis (ACT) are attempting to bounce off their fifty day moving averages, Avago Techonologies (AVGO) has pulled back to the twenty day moving average and is three weeks tight, and Illumina (ILMN) is setup in a flat base on top of cup and double bottom handle.
The short side, except for a few stocks, needs time to tighten up after the major squeezes many of these stocks experienced recently. Until there is more distribution in the market, traders would be prudent to thread lightly on the short side.
Going into 2015 it is hard to predict a bear market is around the corner. The market rarely ever falls into a bear market without at least another major rally attempt to new highs.
With the third year of the presidential cycle historically bullish, it would not be surprising if the market fell into a multi-month, major correction, as we approach the Yellen "couple of meeting's" tightening schedule she alluded to at the last FED press conference (February or March). But the markets have historically only reacted negatively short term term as the FED begins its tightening cycle and continued to advance higher until the FED has raised rates at least several times.
In conclusion, based on historical precedents of the presidential cycle and FED tightening, I'm expecting the market to finish this rally at some point early next year and fall into a minimum of a 12 - 15% corrrection, to as much as 20% on forced liquidations. Resume the bull market for the remainder of 2015 and possibly 2016, at which point FED tightening and the Presidential race will take their toll on the market. With the Nasdaq so close to all time highs at 5,132.52, I would not be surprised if the market achieved this level before a bear market begins.
Good luck and happy new year if this turns out to be the last market update of the year.
Tuesday, December 23, 2014
Gold Silver Ready To Follow Oil and Gas Collapse
There are many reasons gold, silver, and other commodities should be rallying. Two main ones are, geopolitical turmoil (flight to safety) and worldwide quantitative easing (fear of inflation) which seems to have no end. Yet, oil collapsed over 40%, natural gas 30%, gasoline 35% in the last three months, and now precious metals such as gold, silver, copper, platinum, and related miners, are setup in bearish patterns ready to rollover.
So why is this happening? Inflation, which should have reared its ugly head by now after a massive amount of quantitative easing by the FED, additional quantitative easing by the Bank of Japan and China, and hints that the European Central Bank is about to embark on their own version of quantitative easing, has not shown up in official government data. In fact, central banks around the world are nervous about deflation. Though if you ask the average consumer, they will tell you they have felt the affects of inflation over the last few years in their day to day purchases.
The strong rally in the dollar has had the effect of lowering import prices and falling oil prices have been able to offset price increases in day to day purchases, and the FED has indicated barring a sudden collapse of the economy, interest rates will start heading higher early in 2015. Putting additional upside pressure on the dollar and downside pressure on commodities.
Central banks around the world have been selling their commodities to finance their accumulated debts and war machines, to shore up their militarys in an uncertain geopolitical climate.
Oil and oil related stocks were perfect shorts over the last three months. Many rolled over 30% or more in a very short period of time, and could fall further after a period of consolidation.
Gold, silver, and their related miners, have spent the past few weeks consolidating into their respective fifty day moving averages, and are now starting to rollover.
One way to play the potential sell off in commodities is to short the miners. Newmont Mining (NEM), Silver Wheaton (SLW), and Anglogold Ashanti (AU), are threatening all time lows and major support areas.
Another way is to short ETFs like the Spider's Gold (GLD) and Silver Trusts (SLV). Or for the most aggressive traders, buy the 3x short ETFs and ETNs, Direxion Daily Gold Miners Bear 3x (DUST), VelocityShares Inverse 3x Silver ETN (DSLV), or VelocityShares 3x Inverse Gold ETN (DGLD). These are highly volatile instruments and traders be fully away of the risks before trading them.
For more short trading ideas, review the short trading ideas list (click).
So why is this happening? Inflation, which should have reared its ugly head by now after a massive amount of quantitative easing by the FED, additional quantitative easing by the Bank of Japan and China, and hints that the European Central Bank is about to embark on their own version of quantitative easing, has not shown up in official government data. In fact, central banks around the world are nervous about deflation. Though if you ask the average consumer, they will tell you they have felt the affects of inflation over the last few years in their day to day purchases.
The strong rally in the dollar has had the effect of lowering import prices and falling oil prices have been able to offset price increases in day to day purchases, and the FED has indicated barring a sudden collapse of the economy, interest rates will start heading higher early in 2015. Putting additional upside pressure on the dollar and downside pressure on commodities.
Central banks around the world have been selling their commodities to finance their accumulated debts and war machines, to shore up their militarys in an uncertain geopolitical climate.
Oil and oil related stocks were perfect shorts over the last three months. Many rolled over 30% or more in a very short period of time, and could fall further after a period of consolidation.
Gold, silver, and their related miners, have spent the past few weeks consolidating into their respective fifty day moving averages, and are now starting to rollover.
One way to play the potential sell off in commodities is to short the miners. Newmont Mining (NEM), Silver Wheaton (SLW), and Anglogold Ashanti (AU), are threatening all time lows and major support areas.
Another way is to short ETFs like the Spider's Gold (GLD) and Silver Trusts (SLV). Or for the most aggressive traders, buy the 3x short ETFs and ETNs, Direxion Daily Gold Miners Bear 3x (DUST), VelocityShares Inverse 3x Silver ETN (DSLV), or VelocityShares 3x Inverse Gold ETN (DGLD). These are highly volatile instruments and traders be fully away of the risks before trading them.
For more short trading ideas, review the short trading ideas list (click).
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