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Tuesday, May 03, 2016

The Dow dropped 140 points today on average volume.  The advance/declines were 3 to 1 negative.  This should move the summation index lower.  My thinking is that we have something going on here and it will be to the downside.  The technical indicators are already oversold though.  But the tone of the market has turned negative.  Today everything was sold and that usually means that there is something going on underneath the surface.  What that is, I don't know.  I suppose that I'll be looking for some type of near term light volume rally to buy the SPY May puts.  But we may just drop from here.  I suppose in hindsight that yesterday was the day to get short.  GE was off 1/4 on light volume.  Still holding on to the 50 day moving average.  Gold fell $7 on the futures as the US dollar was higher.  The XAU fell 3 1/2, while GDX lost 3/4.  Volume was good to the downside again.  It is shaping up as a poor week for the miners so far.  Mentally I'm feeling OK.  Volatility has picked up in the past week and it is something to pay attention to.  I'm not sure what it all means but the market is starting to roll over.  Of course this could all change tomorrow but I don't think so.  With the already oversold conditions, it's dangerous to try the puts.  However we also must recognize what is happening here.  Selling has sprung up out of nowhere and we must pay attention.  The employment number on Friday could be trouble.  That's a guess as usual.  There's still plenty of time left in the May option cycle.  I would like to have a better handle on things here but I don't.  Is it possible that we hold up here and head to new highs?  Anything is possible in the game.  But I'm going to be looking for lower prices.  What is needed is the proper entry point and waiting for some upside is my thought right now.  If we simply continue lower from here, then the trade has been missed.  Foreign markets that were open were generally lower.  That trend will probably continue overnight.  We'll see what tomorrow brings.

Monday, May 02, 2016

Back to the upside today as the Dow gained 117 points on light volume.  The advance/declines were positive.  The summation index appears to be trending sideways.  We were higher from the start and the opportunity to get the SPY May calls appears to have passed.  If we continue higher into the end of the week there might be a chance to switch back to the SPY May puts.  But we will have to see light volume and poor breadth for that idea to work.  There is a chance that we run up to new highs here as well.  That is the least expected scenario and that gives it perhaps the best chance of occurring.  GE was up 1/8 and the volume was very light.  The 50 day moving average is still showing support here.  Gold was up a couple bucks on the futures despite another good drop in the US dollar.  The gold shares lagged as the XAU fell 2 1/8 and GDX shed 3/8.  Volume was good.  Perhaps it is time for another pause for the gold shares.  Maybe even some decent decline as some of these issues have more than doubled since the beginning of the year.  Mentally I'm feeling OK.  I'm still looking for higher prices near term as things got bearish pretty quickly.  However right now there isn't a clear signal one way or the other.  Getting long Friday on the decline was the near term play.  So now we'll have to wait.  The employment report on Friday could be the next big catalyst.  But we don't want to get into a guessing game.  If things line up OK, I'll look at the SPY May puts on Thursday.  If we are choppy into Friday, I may have to sit things out.  We'll let the market decide for us what to do.  Japan has been very weak in the past two sessions so we should see some kind of bounce there hopefully.  The other Asian and European markets were generally weaker but not as much as Japan.  We'll see if they follow the US higher overnight.  

Friday, April 29, 2016

We got some downside follow through today as the Dow fell 57 points on good volume for a change.  The advance/declines were negative.  We were down well over 150 points during the session but made a last hour comeback.  Short term oversold on some indicators.  The recent breadth has not been as bad as the decline has been.  I'm looking for a short term rally at the beginning of next week.  Right now I think that any weakness Monday can be bought for a bounce trade.  I'll probably be looking at the SPY May calls to start the next month.  The decline here has been short and quick for now.  I don't know if it will actually be the beginning of something more sustainable.  Time will tell on that.  GE was off 1/8 and the volume was light.  Gold took off to the upside on a still weaker US dollar.  It appears that the precious metal is finally breaking out to the upside from its sideways congestion zone.  That would coincide with the dollar breaking down from the support at 94.  It appears that the rally we've seen so far in gold this year is for real.  The XAU was up almost 6 points, while GDX added 1 1/2.  Volume was just a bit higher than average.  Mentally I'm feeling OK.  An interesting end to the month as volatility picked up in the last two days.  Once again I must admit that I don't know why.  My thinking is that we'll see some type of rally attempt in the beginning of next week and after that, who knows?  My theories haven't been working lately though.  Technically the short term indicators have either rolled over or are oversold for the major stock indexes.  The small stocks, which were acting poorly lately compared with the big caps, are now showing some relative strength.  Overall it remains a very mixed bag.  Three weeks to go in the May option cycle so the premiums are where we want them for trading.  There is a little volatility built into the prices now though.  Some Asian markets were closed overnight and Europe was weaker.  Something is going on here that we'll find out about in due time.  Plenty to ponder over the weekend.  I think that you have to be extra nimble trading right now.  Do not fall in love with positions.  I'll be checking the charts over the weekend to come up next weeks game plan.  for now it's Friday afternoon and time for a break.

Thursday, April 28, 2016

To the downside today as the Dow fell 210 points on better volume.  The advance/declines were 2 to 1 negative.  The summation index may be moving sideways now.  GDP was a little light and Japan didn't add more stimulus.  However even though we sold off early, the market did make it all the way into positive territory.  The final couple hours saw the market fall off a cliff.  The advance/declines didn't support such a big drop today.  I must admit that we are in a spot where I don't have a firm grasp as to what is going on.  The short term technical indicators have now rolled over for the major indices.  The small caps are already oversold.  I'm inclined to believe that rallies can be shorted now.  My ideal scenario for buying the SPY May puts does not look like it will happen.  GE was off few cents and the volume was light.  Gold was up $17 on the futures as the US dollar broke through the important 94 level.  The XAU rose 3 1/3, while GDX gained a point.  Volume was heavy.  If the dollar continues to fall here it would be a positive for gold.  Gold hasn't broken out of its congestion zone yet though.  Mentally I'm feeling OK.  I'm not sure this is the beginning of the down trend that I'm looking for but it could be.  Some of my short term indicators will be oversold already.  Perhaps today was some end of the month selling.  If so we should see some more tomorrow.  Not exactly knowing what is going on here doesn't exactly inspire any confidence in trading it.  I'll probably let tomorrow go by and try and regroup over the weekend.  If the US dollar does continue to drop, that would be a positive for stocks in my mind.  But I cannot rule out a multi-week decline as we are almost in the month of May which usually isn't a good one for stocks historically.  Foreign stocks were mixed with Asia falling from their highs and Europe coming back off of their lows.  We'll see if we get some downside follow through as we close out the month tomorrow. 

Wednesday, April 27, 2016

The Dow gained 51 points today on better volume than we've seen lately.  The advance/declines were 2 to 1 positive.  The summation index is heading higher.  The Fed came out with no change in interest rates.  The rest of what they had to say can be interpreted either way depending on if you're bullish or bearish.  The overall market was weaker than the Dow.  That has been the case for a while.  The news on earnings was negative and there was every reason for some kind of sell off.  The market has been resilient despite poor numbers.  This says that prices will go higher.  The small stocks have been relatively weaker and that should eventually lead to a decline.  But I do think we'll go up in the near term.  GE was basically flat on light volume.  Gold was up a few bucks on the futures as the US dollar was a bit lower.  The XAU rose 1 1/3, while GDX added 1/4.  Volume was lighter than average.  Mentally I'm feeling OK.  We'll get the 1st quarter GDP report tomorrow morning and that should get things moving either way.  The small stocks are certainly oversold here and a bounce there could be coming.  The advance/decline line for stocks continues to make new highs and that is bullish.  However on the weekly small stock charts, some of them are showing potential head and shoulders tops.  Theses haven't been confirmed yet but it is something to keep an eye on.  Also big cap leadership is a late stage bull market symptom, not something that usually leads to a strong leg up.  So the signals all around are somewhat mixed.  I'll make the case for some more upside near term followed by a decline.  If we can get to new all time highs or near there on the S&P 500 with light volume, that will be what we are looking for to purchase the SPY May puts.  That's the scenario that I'm waiting for.  We will just have to wait and see if that happens in the next few days.  Foreign markets were mixed with Asia lower and Europe higher.  We'll see how the markets react to the GDP number tomorrow.

Tuesday, April 26, 2016

Waiting on the Fed it seems as the Dow gained 13 points on light volume.  The advance/declines were 3 to 1 positive.  The first hour saw a jump up and then right back down again.  The rest of the day was a meandering affair.  The summation index should be moving back up after today.  I do think that the market will rally from here for a bit.  Overbought and staying that way.  I would like to see a light volume attempt to set new highs on the S&P 500.  That is the set up in my mind for the SPY May puts.  We'll just have to wait and see if the market cooperates.  GE was up almost 1/4 on light volume.  Gold rose $5 on the futures as the US dollar was lower.  The XAU added 1 7/8, while GDX gained 1/2.  Volume was average.  Perhaps we'll see some movement in gold after the Fed as well.  Basically sideways in gold itself for the past two months.  Mentally I'm feeling OK.  Small stocks were mixed to day with the tech names leading some of the indices there lower.  Perhaps the earnings from AAPL after the bell will get things going to the upside there.  RUT had a good session.  Add very good market breadth today and you can see why a case can be made for higher prices in the near term.  The expensive option premiums have led me to not try the SPY May calls here although that could be a mistake on my part.  Like I have said, there's always a chance that we break out to the upside through the overhead resistance.  However at this juncture I'm placing the odds on that as very low.  I could be wrong and often am.  I expect nothing new from the Fed tomorrow.  The GDP report may be more of a market event.  Foreign markets were mixed overnight.  We'll see what the Fed has to say tomorrow.

Monday, April 25, 2016

A quiet start to the week as the Dow fell 26 points on light volume.  The advance/declines were 2 to 1 negative.  This could turn the summation index sideways.  Waiting on the Fed here basically.  I think that we are going to move up this week after the Fed.  Ideally I'd like to see us move towards new all time highs on light volume.  That would potentially set up the SPY May put trade.  Of course there's always the chance for a break out to the upside as well.  However we would have to see the volume pick up on any breakout.  GE lost a few cents on average volume.  Holding the 50 day moving average here so far.  No trades planned for GE at the moment.  Gold gained about $10 on the futures as the US dollar was lower.  The gold shares didn't follow as the XAU shed 3/4 and GDX was off 1/8.  Volume was pretty light though.  I don't have any trades in the pipeline here either.  Mentally I'm feeling OK.  The technical indicators have rolled over for the small stocks to a larger extent than the big caps.  However it does look like things could turn back up here.  That is a really short term view of things right now.  The Bollinger bands on some of the small stock indices are contracting.  This implies a pretty good move one way or the other.  Which way and how soon are the questions.  There is plenty of time in the May option cycle to put on a trade.  I think that I will let the Fed and the GDP report pass before trying something but my thoughts could change on that.  I do think that waiting to buy some index puts is the right move for now.  Foreign stocks were weak overnight but not excessively so.  We'll keep an eye on the overnight developments.