Jun 172015
 
S&P500 daily at end of day

S&P500 daily at end of day

End of Day Update:

It was a volatile Fed day with strong intraday moves in both directions, but the S&P500 only managed to hang on to a four-point gain by the closing bell. Volume was the highest in a week, but still repressed by the typically slow summer season.

The Fed didn’t say anything that surprised us and is why we finished near where we started. It would have been foolish to expect anything else since every other Fed statement this year failed to break us out of this trading range. The policy remains accommodative, but expect a token rate increase before the end of the year. While many speculators are afraid of rate hikes, the far bigger shock to the system was ending the Fed’s bond buying program last year. Not only did we survive that, but the market is up more than 15% from when the Taper started. Going from 0% to 0.25% in short-term interest rates is trivial in comparison to ending a trillion-dollar money printing operation.

The game of chicken in Greece continues as their politicians refuse to compromise and European leaders are reluctant to call their bluff. Some analysts claim the probability of a Grexit is now up to 50%. This is weighing on European markets, but the S&P500 is less than 2% from all-time highs. Similar headlines five-years ago sent shockwaves through the market, but this time the risk is far less since the financial system has had plenty of time to manage and hedge the risk posed by a Greek default. While we should expect some near-term volatility, the market holding near the highs tells us these problems in Greece are already priced in.

Individual Stocks:

$AAPL – Apple continues to underperform the broad market, closing in the red on a day where the indexes finished in the green. It seems some of the anticipation built up ahead of the Apple Watch’s release and the developer’s conference is slowly leaking out. The stock slipped under its 50dma and is more than 5% off of its 52-week highs. While there are no signs of an impending collapse, the stock might be settling into a sideways trading range.

ALGN daily

ALGN daily

$ALGN – It was a dramatic day for Align as some of their patents came under threat. This dropped the stock $5 from the opening highs. While I’m not in the industry, I suspect ALGN’s branding and relationships with orthodontists are more of a moat than its technical patents. Long-term this won’t be a big deal and healthy competition is always good for business. But in the short-term, anything is possible as traders react emotionally. It is nice to see the price rebound and finish well off the lows. Three more closes above $60 and the storm will have passed, with the added benefit of scaring off the weak and emotional owners. Shakeouts like this improve the upside potential. But until then, treat this stock with extreme suspicion. There is a good chance today’s afternoon rebound will fizzle in coming days and we retest that $60 support.

Jani

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Tags: $S&P500 $SPY $SPX $AAPL $ALGN

 

 Posted by at 9:50 pm on June 17, 2015
Jun 162015
 
S&P500 daily at end of day

S&P500 daily at end of day

End of Day Update:

It was an interesting day as the S&P500 rebounded from yesterday’s selloff. The chart doesn’t suggest this bounce is any different from all the others that failed. The gains were modest, we closed under 2,100 resistance, volume was below average, and we continue making lower-highs. The notable exception is the situation in Greece deteriorated materially, yet the market rallied.

We easily could have crashed a couple dozen points as Greece’s politicians refused to negotiate with European leaders. That’s what common sense says should have happened, so why didn’t it? The thing many speculators fail to understand is headlines, fundamentals, and technicals don’t move markets. Only people changing their outlook and making adjustments to their portfolio drives price. It doesn’t get any more simple than that. Shifting expectations and the resulting buying and selling move prices, period, end of story.

Puting today’s move in context, stock owners read the Greek headlines, shrugged and went about their business. The reason we didn’t see the “common sense” selloff is every owner who fears the Grexit is already out of the market. When there is no one left to sell the news, it no longer matters.

Today’s price-action is telling us Greece isn’t a big deal anymore. Without a doubt these headlines will continue to drive volatility, we could remain range-bound, and will likely see a kneejerk selloff when Greece finally defaults and gets the boot, but today’s trade tells us this will be a short-lived move since most of the Grexit sellers are long gone. The way to trade the volatility is to continue buying the dip. While this market will eventually crash, it won’t be because of something everyone is talking about. Remember, people don’t get hit by the bus they see coming.

Individual Stocks:

$AAPL – Apple is mirroring the indexes and it’s fate rests with the rest of the market. Last week’s developer conference came and went without a major catalyst and it will be a while before we have another one. There is no reason to sell the stock, but there isn’t much to get excited about either.

$EBAY – Fairly dramatic move today. The day started with a bang as the stock popped a dollar and a half at the open, but the move quickly fizzled and we finished with a much more modest fifty cent gain. While I’d prefer to see more constructive price-action than this intraday reversal, we remain above support and today’s pop shows the explosive potential remains to the upside. We are close to the breakout point and we need to watch this one closely, but it isn’t time to pull the ripcord yet. Failing to hold $59 and we will be forced to reconsider.

$ORCL daily

$ORCL daily

$FEYE – FireEye continues to ramp up. While it is exciting to see these gains pile up day after day, owners should be shifting to a more defensive posture. We’re close to a 20% gain from the breakout point and it wouldn’t be a surprise to see the stock pause near $55. While it could easily continue racing higher, only a fool would be disappointed by locking in a 20% gain over a few weeks. A more aggressive stance is moving up a trailing stop and letting it ride. We have modest support near $50, but there is a good chance a near-term pullback will under cut $50 for no other reason than chasing off all the owners with a stop under $50. The proactive trader that locks in profits near $55 could reenter following the $50 undercut and bounce.

$ALGN – Align is marching ahead and pennies away from eclipsing January’s intraday highs. At that point virtually everyone in the stock will be sitting on profits and excited to see them continue growing. Confident owners keep supply tight and prop up prices. An Ebay style pullback to $60 is possible so it is riskier to chase if someone isn’t involved yet.

$ORCL – In the big-cap space, Oracle is getting interesting. Today’s 2% gain on 60% above average volume makes this worth a look. We’re on the verge of breaking through the upper end of the $45 trading congestion. After that, the only thing holding us back is last December’s $46 highs. Clear this and we’ll be making multi-year highs. While not as exciting and fast-moving as some of the smaller growth stories, profits are profits and some slow money offsets the volatility from more speculative holdings.

Jani

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Tags: $S&P500 $SPY $SPX $AAPL $EBAY $FEYE $ALGN $ORCL

 

 Posted by at 10:05 pm on June 16, 2015

Is it Time to Panic?

 Intraday Analysis  Comments Off on Is it Time to Panic?
May 262015
 
S&P500 daily at end of day

S&P500 daily at end of day

End of Day Update:

It was a dramatic day as the S&P500 plunged 1% in the first session back from the long weekend. As unnerving as it felt, volume was below average and we are only 1.4% off of all-time highs. Hard to claim this was a crash by any stretch of the imagination, but in the market perception is reality, and today felt a whole lot worse than it looks.

Before the open, bullish sentiment on Stocktwits $SPY stream already fell to 41% and AAII’s bullish sentiment hovered near 5-year lows. As much as people try to correlate record prices and bullishness, we are anything but bullish at these highs. But this is actually a common phenomena. Every rally feels extended and fragile at the far right edge of the chart. Only months later do buy-points become obvious. If this were easy, everyone would be rich.

The five months of sideways churn since the start of the year cooled off any overbought condition that crept into the market. While we could easily extend Tuesday’s selloff on Wednesday morning, using bearish sentiment as a guide, we are far closer to the end of the selling than the start. Once the last of the hopeful bulls bailout, supply will dry up and we will bounce. The best trades are the hardest to make and today it felt a lot easier to sell this weakness than buy it.

Jani

 Posted by at 9:19 pm on May 26, 2015
May 192015
 

End of Day Update:

The S&P500 did a lot of nothing Tuesday as we consolidated Monday’s modest breakout. It stayed inside a 10-point range and closed lower by less than a tenth-of-a-percent. The benign trade tells us most owners are not taking profits and continue holding for higher prices, while those with cash don’t feel compelled to chase the breakout.

When few change their mind, prices don’t move and that is what happened today. Every other time the market challenged 2,120 this year, we quickly retreated from the highs. Today’s close marks the fourth day in a row we finished above this widely followed resistance level, making this time different.

While there are plenty of negative headlines making the rounds, none of them are new as we’ve seen versions these recycled headlines for months. Anyone who fears these issues sold a long time ago and is why periodic flare ups here or there no longer dent this bull market. Many claim this strength in the face of so many worries is irrational, but it makes perfect sense if you understand how markets work. When there is no one left to sell, we stop going down.

If prices remain above 2,120, expect recent sellers and shorts to come crawling back as the fear of being left behind overcomes their fear of gloomy headlines.

Jani

 Posted by at 9:36 pm on May 19, 2015
May 062015
 
S&P500 daily at end of day

S&P500 daily at end of day

End of Day Analysis:

Wednesday saw another high-volume selloff, this time triggered by unnerving comments from Janet Yellen concerning stretched equity valuations. The index sliced through the 50dma and undercut recent lows in the 2,070s.

While we finished in the red, today’s price-action is actually quite intriguing to the dip-buyer. We undercut recent lows, but rather than trigger an avalanche of reactive stop-losses, supply dried up and dip-buyers rushed in, lifting us 10-points off the intraday lows. Bears had a gift-wrapped opportunity to extend the selloff to 2,050, but the market bounced instead. Clearly there is still uncertainly swirling around the market, but this afternoon’s pause gives nervous owners time to more rationally form their next trading decision.

The last two-times we undercut the 50dma but finished off the lows, we saw strong rebounds the next day. Will tomorrow make it three in a row? If we reclaim the 50dma, there is a good chance the rebound will continue through all-time highs. There are two ways an over-extended market refreshes itself. The most obvious is by pulling back. But the second is churning sideways and grinding out the optimism. While we’re still within a couple percent of all-time highs, it’s been a trying year as the volatility chased off the weak holders. While everyone is still waiting for the widely expected correction, the longer we hold near the highs, the more likely we are to break them.

Jani

 Posted by at 10:24 pm on May 6, 2015