Good evening StockBandits!
For months, traders have anticipated the September FOMC meeting to be the one where tapering begins, but the main event of the week came to pass today without any change on that front. Traders immediately celebrated the ongoing QE and prices certainly changed, with stocks spiking sharply higher on the news at 2pm ET to take every index to new highs.
The August lows were only about 3 weeks ago, yet it almost seems like forever since those levels were visited. Since then, the 4 indexes I track regularly are up 6-7% without exception. That sort of ramp in such a short period of time puts the bulls very much in the driver’s seat, but well overdue for a rest of some sort. We saw only a couple of days of basing last week, but prior to then and ever since it’s been nonstop buying.
The difficulty here is just not being on board, and that classifies traders at the moment but not investors. The buy-and-hope crowd has enjoyed a nice year with very limited periods of pain, whereas those of us who are more active and who keep an eye on risk management have recognized many occasions in 2013 where chasing excessive strength just doesn’t provide much of a game plan due to the lack of a technical exit. That’s again the case here, as prices act as if they’ll never retreat again but have simply come too far to chase.
We could see some additional strength here – there’s no rule to state otherwise – but my hunch is that new buys should be taken on the shortest of timeframes. I don’t expect the market to just mark a lasting high here (a lasting high is often times more of a process), but the odds are definitely elevated for some natural profit-taking. Now that we’ve seen the indexes break out, the key for the bulls will be to hold those breakouts over the next few days to avoid a failure.
In the coming weeks, we have the debt ceiling coming to center stage, another earnings season, and the ongoing potential for Middle East tensions. Technically, prices are extended as well, so I’m going to proceed with caution here amid this impressive strength by sticking with single-day plays for tomorrow.
If you have a couple of stocks you’d like me to review in tomorrow’s video, hit reply to this email and include the tickers and I’ll put them on the list.
Let’s get to the charts.
NAZ – The NAZ reversed lower on Monday but returned with strength yesterday. Today it was sitting just beneath the flat line on the session when the FOMC announcement was made, and soon after it finished the day up 1%. I discussed a measured move scenario here on Sept. 9 to the 3814 area, and it’s well on its way. A rest would be ideal for the bulls to digest this rally, but they’re running with momentum and just don’t seem interested in slowing down after this 6% rally in just 3 weeks.
SP500 – The S&P broke out today in a decisive way, pushing 16 points past 1709 to close at 1725. It has hardly seen a retreat over the past 3 weeks, running over 6.2%, but the buying hasn’t slowed down yet. This is a meaningful technical breakout, but as I discussed here last night we’ll need to see if it can stick. Prices are stretched and some mean-reversion may be in order soon now that the FOMC catalyst is out of the way.
RUT – The RUT closed at a new all-time high tonight after a solid performance today on the heels of yesterday. This index put in a little rest last week, but has just run 7% since late August and certainly deserves a rest.
DJIA – The DJIA has outperformed both the NAZ and S&P on this rally, tacking on 6.4% since the August low was made just 3 weeks ago. Today it made a new all-time high, but given its stretched condition it sure wouldn’t take much to see a quick retreat back inside the range. All eyes will be on the resolve of the bulls over the next few sessions to see if they can maintain this push to new high territory.
Notable Names:
GS is like several other financial names in that it has seen some recent strength but hasn’t broken out alongside the market. Here it has reached the upper end of its $20 trading range, which could project a run to the $190 area if a measured move occurs. That would help the S&P 500 if it happens, making this one to keep an eye on. The ideal scenario would be some additional rest up here just beneath the highs.
CI is a great example of how quickly the look of a chart can change. We’re in an unstoppable market right now, but one day could change everything in the near term, just as it may have today in CI. This stock had broken out and was on cruise control until it fell out of bed today with this negative change of character. Just a reminder to maintain stops because the market can shift on a dime.
FSLR is attempting to stabilize here after repeatedly testing key support a few weeks ago. A turn up through $39.80 looks good for a single-day play on the long side and this has some short-squeeze potential given its relative weakness over the past few months.
SCTY is another solar stock perking up here with a nice boost last week and a few days of rest since then. A move through $37.05 could spark interest here, so I like it for a single-day play above that level.
Z is churning here beneath a trend line and just a short distance off its recent high. A turn up would garner attention so I’m watching this one for a single-day play if it can clear $100.80 and get back on the move.
NUS was listed here last night but didn’t trigger a play today. The same setup is still valid, so I’m relisting it tonight for a single-day play if it can clear $95.50. Prior breakouts through lateral resistance are circled in blue and have each lasted just a day, so that’s all I’m looking for here.
New Swing Trade Candidates:
No new swing candidates tonight, tape is extended so I’m waiting for better setups to emerge and will stick with existing positions for now.
Bullish Watch (click for charts)
Bearish Watch (click for charts)
Trade Like A Bandit!
Jeff
