EURUSD Analysis – 1 August 2014

Right now the Euro is stuck between demand at 1.32960 and supply at 1.35160. There really isn’t much to do at the moment as far as opening a new position goes. Overall it still looks like it wants to go lower to the demand at 1.32960.

EURUSD - Daily - 1 August 2014
EURUSD – Daily – 1 August 2014

Looking at the bigger picture, it is still in an uptrend, with the 50% retracement of the larger move coming in at 1.30200.

Patience is the name of the game at the moment, don’t get chopped up in the middle of nowhere.

Correction Done?

This morning the market sold off after Yellen gave her little talk. I’m watching the Russell 2000 ($RUT) to get an indication of market direction and I think that we are done with this correction and are going to take a stab at the highs again. My reason is that we hit some 30 minute demand that lines up right with the 50% retracement of the total move up. It is a logical, clean retracement right at the 1,150 level.

$RUT - 30 Minute - 15 July 2014
$RUT – 30 Minute – 15 July 2014
$RUT - 180 Minute - 15 July 2014
$RUT – 180 Minute – 15 July 2014

If this level does not hold then all bets are off and I’ll be watching the 1,030 level for the next good looking demand.

Indexes Holding Demand – 9 July 2014

So we’ve sold off for two days and I think the selling is done for now. The Russell 2000 ($IWM) is down 3.83% over the two days, which is a fairly large move. All of the indexes hit daily demand yesterday so I took the opportunity to get long in a number of names, namely

  • SSYS
  • LNKD
  • TWTR
  • TSLA
  • IWM
  • BMRN
  • AMZN
  • NTES
  • SPWR
  • TTWO

While we are in an uptrend, I am buying dips and I consider this a dip.

$COMPX - Daily - 9 July 2014
$COMPX – Daily – 9 July 2014
$DJI - Daily - 9 July 2014
$DJI – Daily – 9 July 2014
$INX - Daily - 9 July 2014
$INX – Daily – 9 July 2014
$RUT - Daily - 9 July 2014
$RUT – Daily – 9 July 2014

We have had a big run, so I am a little cautious and keeping a close watch on my positions, but a trend is a trend until the end.

 

IWM – Potential Time Correction

The markets sold off a little today, led by the Russell 2000 ($IWM, $TF_F, $RUT) that took a 1.7% pounding. If you think back to the March through May sell-off it was the Russell that lead then too, so we might be in for a deeper correction. I saw no need to get short today into turnaround Tuesday, but I’ll certainly be keeping a watchful eye on the Russell for a while.

IWM - 180 Minute - 7 July 2014
IWM – 180 Minute – 7 July 2014

A market can correct either by selling off, or by consolidating for a while. We may be seeing the latter, with the Russell potentially trading in a range between $108 and $120. Until we break and hold either side, I’m going to consider this a trading range, or time based correction. Certainly something to keep a watchful eye on, as the Russell seems to be the canary in the coal mine right now.

 

Indexes In Demand – 25 June 2014

There’s been a lot of hoopla about the sell-off yesterday. It is important to keep perspective and watch supply and demand levels. To me, the indexes still look strong, in fact, they sold off right into demand. Until demand is broken, I’mm still bullish and a buyer.

DIA - Daily - 25 July 2014
DIA – Daily – 25 July 2014
IWM - Daily - 25 July 2014
IWM – Daily – 25 July 2014
SPY - Daily - 25 July 2014
SPY – Daily – 25 July 2014

Biotech – 22 June 2014

Looking at the weekend charts, there are two sectors that initially stand out to me, biotech ($IBB) and healthcare ($XLV).
Focusing on biotech for now, the $IBB ETF had a lovely day of Friday breaking out from a multi-day base.

IBB - Daily - 22 June 2014
IBB – Daily – 22 June 2014

I’ll be keeping my eye on a number of biotech names this week looking for entries. The charts I like most are

  • $AEGR
  • $ALXN
  • $AMGN
  • $BIIB
  • $BMRN
  • $ILMN
  • $NPSP
  • $SGEN

I already have long positions in $BIIB, $NPSP & $SGEN.

Market Thoughts – 1 June 2014

Spending some quiet time looking at the markets while they are closed often provides some much needed perspective. The indexes were strong this week, and it looks like they are ready for another leg up. I like to look at the sectors to see if there are any trading opportunities, or just anything that stands out that will give me a clue as to where to turn my attention during the week.

Starting with the $XLF which broke out of a consolidation pattern and is just holding there.

XLF - Daily - 1 June 2014
XLF – Daily – 1 June 2014

Full disclosure, I am short $XLF as well as $JPM. I faded the move out, and will be watching for a break of last weeks high or low either way.

Consumer staples ($XLP) broke out nicely this week. I see no immediate trading opportunity in the index, but I will be looking for opportunities in individual stocks in the sector.

XLP - Daily - 1 June 2014
XLP – Daily – 1 June 2014

 

Healthcare ($XLV) is another strong one, breaking out of an ascending triangle.

XLV - 180 Minute - 1 June 2014
XLV – 180 Minute – 1 June 2014

I will be looking to get long on a retest of that breakout.

The retail sector ($XRT) is a very interesting one to me. It has been relatively weak the past month, the weakest of the sectors that I watch in fact. I am interesting in the short side due to this relative weakness, and am eatching the 84.50 level. It is a nice bull trap trade – breaking out above 84 right into supply.

XRT - 60 Minute - 1 June 2014
XRT – 60 Minute – 1 June 2014

My target is 81 on this one, but I’ll leave a trailer for the possibility of retesting the 78 level.

Biotech ($IBB) is another good looking chart. It broke out of an ascending triangle, and the next stop to me looks like the highs near 280.

IBB - Daily - 1 June 2014
IBB – Daily – 1 June 2014

I am looking at the smaller timeframes for an entry, and like the 236 level.

Homebuilders ($XHB) has made a new swing high, so I like the look of the long. I am looking at 31 for my entry, a nice base just above the low, again looking for a retest of the highs.

XHB - Daily - 1 June 2014
XHB – Daily – 1 June 2014

That’s everything that I am watching right now, lets see how those pan out this week. It is important to be patient right now as we are in summer trading.

 

Market Corrections

For anyone casually watching the market via daily newspaper quotes of the $SPY or $DIA, you’d think all is well and the market continues to fly. But if you scratch a little deeper you’ll find that all is not well, and it has been a very tumultuous two months for the markets.

Both the $QQQ and $IWM have been weak, with $IWM down 10% from the highs, officially putting it in correction territory. And moving away from the averages for a minute, a cursory glance at most charts will reveal some ugliness.

That hints at a large part of the story, which is the lack of correlation between the indexes. For example, the correlation between the $SPY and $IWM right now is 0.43, up from 0.14 (almost no correlation at all) only three days ago. That is very low considering the indexes probably average out at about 0.80 I would think.

SPY - IWM correlation
SPY – IWM correlation

It is a very tricky and testing time to be in the markets, so it is important to keep perspective. I’ve marked off the percentage moves on each index chart and will be watching those, and of course will honor all my stops if they get hit.

DIA - Weekly - 16 May 2014
DIA – Weekly – 16 May 2014
IWM - Weekly - 16 May 2014
IWM – Weekly – 16 May 2014
QQQ - Weekly - 16 May 2014
QQQ – Weekly – 16 May 2014
SPY - Weekly - 16 May 2014
SPY – Weekly – 16 May 2014

Many people will be watching the $IWM as the canary in the gold mine, especially the head and shoulders that is developing on it. That is right at the neckline now and has a measured move to $95, approximately 20% from the highs.

Keep clam and trade on.