No Love For The Bear

The stock market is nearing all-time highs.  In fact, it seems to keep reaching new ones on a regular basis.

Advancers are leading decliners.

Percentage of stocks above their 20/50/200 DMA is higher than stocks which are not.

The only thing that the bears can take some comfort in with these charts is that some of the volume and oscillators are indicating a possible downward trend.

Yes, there has not been a whole lot of love for the bears lately and they are feeling left out.

The contrarian would say, this means we are due for a correction.

The conformists or anti-contrarians say lets keep the party going.

The realists say, perhaps we should look for stocks or sectors holding up well enough but not yet joining the party.  Perhaps stocks with some “safe” characteristics such as dividends would be nice to include too.  Perhaps these are just waiting for the right invite.

The chartists say the overall market is doing well.  SPY and DIA charts look strong . . .

Though, the QQQ is perhaps looking a bit extended.

So where do we look for stocks and or sectors holding up well just waiting to rally?

Mr. Bull, I’d like you to meet Mr. Financial Sector.  He’d like to join the party.  He’s just waiting for the right conditions.   Like . . .

–          Financial Reform

–          Tax Reform

–          Inflation and Rate increases

Those are the tickets that will get him out on the dance floor dancing the happy dance.

The technical charts for the financial sector look promising.  They look like they are poised for a breakout.

Of course, bulls are hoping for an upward breakout, and the bears are hoping for a breakdown.

Unfortunately for the bears, there are the three catalysts, previously mentioned, just waiting to kick in.  And they are pretty strong catalysts.

Unfortunately for the bulls, the current administration and congress is painfully dysfunctional.  When and if all this is going to happen is anybody’s guess.

So until then, we wait and hopefully enjoy the ride.

#FederalReserve

federalreservefacebook

It appears that the Fed, one of the most conservative – and yet most powerful – anti social organizations in the world has started a Facebook page.

So far, the posts are as stoic, boring and encyclopedic in nature as one would think. However, the posts end up being quite informative and entertaining – thanks to all the Internet Trolls.

Here are some of the better comments…

In response to a Fed post titled “Who owns the Federal Reserve system?”

fedface1

And the Fed’s inaugural post that its new social media presence attracted a humorous response.

fedface2

 I actually like this format.  It ends up being a great point vs. counterpoint debate played out on social media.  As with anything new, the immediate result of this is lots of attention and greater hits on both the  Federal Reserve, and Facebook, page which is a good thing. 

The jury is still out on how successful this will be – but kudos to them for at least trying.

Strangely enough, their Facebook page is not one of their first forays into social media.  The  Fed has a Twitter, YouTube, Flickr and LinkedIn account.

Now all they need is a Vine and Snapchat account.

But all this make me wonder.  With all their current social and internet accounts, why does the Fed even bother with Press Conferences? 

If the Donald can run virtually an entire presidential campaign via twitter or celebrities announce a new album or spouses divorce their counterparts, the Fed could announce a simple rate change in a 140 text or 3 second vine to let the world know what’s going down, or up.

And if transparency is your thing, then they could live stream their double secret private meetings. 

Why don’t they not do this?  Why don’t they totally embrace the new age social media instant access of the internet?

Why?

Because the Fed is old school.  They grew up watching another “social” media platform called TV or even listening to the original social media channel, public radio.    Back then there was such a thing called a Cliffhanger.  That term, for my millennial readers, is from TV and radio shows that were broadcasted on a weekly basis.  It was suspense, a tease, to get you to tune in next week to the same bat channel at the same bat time.  This is exactly what the Fed does now with the markets.

Look at what happened this week.  The whole week, the markets and financial news, was dedicated to Janet Yellen’s press conference on Friday.  A whole week of speculation and anticipation for the next announcement and the result of the closed door meeting.   The whole world hung on their every word and next regularly schedule bat time broadcast.  That my friends, is the ultimate power play.  Even in today’s information, instant access, internet world, old school tactics still work.

And that is why the Fed, their process of determining policy and subsequent delivery of said policy, will never change.

Wishing Upon A Star

Star Light Star – oh wait . . .

Last week I, and lots of other internet chatter board members, noticed a potentially strong reversal signal setting up in the markets.

star patterns

A star pattern can be a strong reversal signal – if (just like with breakouts) there is a strong follow-through.

I bet short sellers were drooling at the thought of a market reversal.

Too bad their wishes didn’t come true.

star 3

That follow-through never happened.

So the markets remain in an uptrend, and by the way, in over-bought territory with yet another potentially disappointing earnings season soon to begin.

So of course the markets are going to continue going up. Right?

Who know’s?

Janet Yellen and the Fed did everything in their power to support the current rally by reversing their expected hawkish view.

I’m reminded of that famous quote from Forrest Gump.

Fed speak and the market is like opening a box of chocolates, you never know what you are going to get.

I’m not going to try to predict the market. But I will try to follow trends and to keep an eye open for confirmed reversals and buying / selling opportunities.

I have already written about MSFT and others in my previous posts. Another one that I am waiting for confirmation is SWHC. It is currently under pressure by activists and downgrades yet continues to show growth and demand due to politics and policy fears. It showed a good pop last Friday, but as of this morning, no follow-through due to downgrades which are pushing it back down.

If it holds the 50dma then that might be a good buying opportunity.

With watching for opportunities in mind, here is my latest and greatest screen generated watch list for April.

Ticker Name
AYI Acuity Brands, Inc.
GOOGL Alphabet Inc.
MO Altria Group Inc.
AMGN Amgen Inc.
AHS AMN Healthcare Services Inc.
AOS AO Smith Corp.
ARW Arrow Electronics, Inc.
AVB Avalonbay Communities Inc.
AVGO Broadcom Limited
CDNS Cadence Design Systems Inc.
CVCO Cavco Industries, Inc.
CTXS Citrix Systems, Inc.
CCOI Cogent Communications Holdings, Inc.
COR CoreSite Realty Corporation
CRTO Criteo SA
CSGS CSG Systems International Inc.
CUBE CubeSmart
DHR Danaher Corp.
PLAY Dave & Buster’s Entertainment, Inc.
EFX Equifax Inc.
ELS Equity LifeStyle Properties, Inc.
FB Facebook, Inc.
FEIC FEI Company
FIVE Five Below, Inc.
FBHS Fortune Brands Home & Security, Inc.
GK G&K Services Inc.
G Genpact Limited
ROCK Gibraltar Industries, Inc.
GILD Gilead Sciences Inc.
GGG Graco Inc.
GVA Granite Construction Incorporated
INGR Ingredion Incorporated
INXN Interxion Holding NV
ISRG Intuitive Surgical, Inc.
MKTX MarketAxess Holdings Inc.
MMC Marsh & McLennan Companies, Inc.
MAA Mid-America Apartment Communities Inc.
MORN Morningstar Inc.
NVR NVR, Inc.
OFS OFS Capital Corporation
ORLY O’Reilly Automotive Inc.
PAYX Paychex, Inc.
PNW Pinnacle West Capital Corporation
POOL Pool Corp.
POWR PowerSecure International, Inc.
PBH Prestige Brands Holdings, Inc.
PRMW Primo Water Corporation
PSA Public Storage
ROIC Retail Opportunity Investments Corp.
RYAAY Ryanair Holdings plc
LUV Southwest Airlines Co.
SYK Stryker Corporation
SKT Tanger Factory Outlet Centers Inc.
SHW The Sherwin-Williams Company
THO Thor Industries Inc.
UFPI Universal Forest Products Inc.
VRSK Verisk Analytics, Inc.
VZ Verizon Communications Inc.
VMC Vulcan Materials Company
WEB Web.com Group, Inc.

Until next time,

Be good, Do Well, Have Fun, and stop wishing, start following, and most importantly – wait for that all important follow-through.

A Double Feature Next Week

double feature

Next week we have yet another episode of the ever popular soap opera and reality entertainment show “The Real Chairman Of The Federal Reserve” otherwise known as The Fed Meeting.  This televised news event will be followed by another semi-annual show called “Triple Witching Friday!”

First the Fed:

Will She or Won’t She?

After a long wait for inflation to accelerate, Janet Yellen and other U.S. Federal Reserve officials face a complex and divisive debate over whether recent evidence of rising prices is strong enough to move ahead with planned rate hikes.

Fed members are very much divided on this issue. Fed Vice Chairman Stanley Fischer said economic data now points to the “first stirrings” of inflation. However, Fed Governor Lael Brainard countered that the Fed should not move until inflation proves its “persistence.”

Fed officials have argued since mid-2014 that those inflation “headwinds” would pass, and recent data on prices of goods and services, as well as a jump in commodity prices, may indicate that time has finally come.

According to a poll recently taken by the National Association of Business,
80% of the respondents expect the Fed to raise rates at least once this year.

rate hikes

So, the short answer is yes, there is a very strong possibility of the Fed raising rates this year, just not so much next week. But with recent improvements in the price of oil, jobs, and the stock market, a rate hike for March is not completely off of the table.

The question is will she or won’t she?

Here is my take.

The question has nothing to do with rates but rather policy and the Feds stance on that policy. I expect Janet Yellen to stick to her guns and take a hawkish view regarding the markets, the economy and rate hikes. She has a plan and I expect her to stubbornly stick to that plan as much as possible. She can do that and still not raise rates – this time.

And yet, none of that may really matter.

Because just a short day or two later, we have March 18th.

The most important day of the week.
My wife’s birthday.  Truly.

But seriously, the second most important fact about March 18th is it also happens to be Triple Witching Friday.  This is when contracts for stock index futures, index options, and stock options, all expire on the same day.
In order to try and predict what will happen as a result of Triple Witching, I will take a slightly different approach other than survey data and federal opinions; chart patterns.

Here is what has happened to the SPY index each of the last four times.

rate pattern1

As you can see, three out of four times the market went up before Friday and then promptly went back down afterwards. The only exception to this was last December. That is when the Fed finally did raise rates for the first time in years.

If three out of four is good enough for a commercial, then it is good enough for me to say there is a fairly high probability of the market following the same sort of pattern this time around.

When Janet Yellen Speaks

This week I have read and heard a plethora of speculation, hype, fear, both from the press, my fellow investment club members and bloggers.  Here are just some of the topics.

Janet Yellen
Not including Federal Reserve Meetings, Janet Yellen has either testified before congress or given a speech / report four times in the past year.  This week she testifies before congress regarding monetary policy. Let’s see what has happened before and after previous speeches and testimony.

• 2/24/2015 Monetary Policy – Congress
• 7/15/2015 Monetary Policy – Congress
• 11/4/2015 Supervision and Regulation – House of Representatives
• 12/3/2015 Economic Outlook – Congress

yellen speaks

Three out of four times the market was in an uptrend before her speech.
Two out of four times the market went up, briefly, very briefly, after her speech.
Four out of four times the market was down within two weeks or less.
So, would you say she is a market killer?
Perhaps it doesn’t really matter what she says?
Perhaps reality and overall market conditions will dictate not only what she says but how she says it?
And her speech will ultimately only serve to confirm market conditions.

 

A Chartist’s Heaven / or Hell
Since we reference one chart already, lets take a look at another.

qqq

What do you see?
Do you see a major support level being tested or failing?
A classic bounce? Or a classic failure setup?
Do you see a Head and Shoulders Pattern?
Do you see a 50/200 Death Cross?
Do you see the last Death Cross actually resulted in a positive uptrend? Off of said support level?

If one were to be truly technical about this I could also add that the left shoulder actually broke above a rising triangle pattern as well as the 200 line.  The right has not and in fact fits more of a continued lower highs and a descending triangle pattern.
If you were to ask me why my head hurts, it is because I keep pulling my hair out trying to make sense of ten billion chart pattern interpretations.
NOTE: Here is my short answer to all of this so far. Again, another discussion I have had . . .

“After all, who or what is left to lead the market in a broad based rally?”
Nothing !

To quote the BORG: Resistance is futile. And so are support levels without some fire to push the ashes up higher.

I don’t know when it will happen, but until conditions change, I do not see current support levels holding up and the market will experience another drop.

So what to do?

Here is an idea . . .

It’s Sunday.  Take the day off.   Watch the Super Bowl.  Watch the Puppy Bowl.  Watch the insanely expensive and entertaining commercials.

It’s what has made this great country of ours what it is today!

You could even watch reruns of the presidential debates!

And don’t forget, this is the last weekend before Lent.  So be sure to finish off all the beer and wine in your house!

Until next time.

Trade well my friends.