Earning season is now upon us. Major reporters this week include a number of banks, GS, BAC, some tech, MSFT, YHOO, GPRO
Indexes:
S&P breaks out. Below was the chart I had posted right after Brexit was announced. Where others were forecasting gloom and doom, I saw a range bound market. Support was found and the level I felt would act at the first support and that held market bounced taking it to new highs. As impressive as this move has been, I feel the breakout will be tested.
I'm concerned that the breadth ratios that I follow are pretty overbought, which will limit the upside. Just as they were at extreme levels after brexit, which I felt would mitigate the selling to the downside. Quite a quick flip, now consolidation, and a successful retest of breakout point is necessary before this market can get going to the upside.
Outlook: Choppy trading, minor pull back expected. This pull back will be a huge buying opportunity. Look for sslingshot sets
Nasdaq, impressive bounce back from Brexit, but note OBV has declining, divergence. Nasdaq has not hit its highs yet. With current breadth readings, I think it will be difficult for it to breakout without more consolidation and some working off of some of the breadth ratios.
Outlook: Choppy trading
Russell: The Russell has underperformed the other indexes and the S&P by a large margin. But there are some positive things going on under neath the surface here. Downtrend line has clearly been broken, out of the major indexes its OBV looks the best.
That said, I am concerned that we have a weekly gap last week and the 121 level is where the IWM broke down last year, That is often a significant resistance point. Like the other indexes, I feel the breakout point -116 level will be re-tested
Breadth Measures:% of stocks above 40 MA, 78%, = Danger zone.
Weekly stocks -- overbought
Vix: at support lows. --
$NYMO: overbought
In sum, I believe this will present a challenging market for the bulls and bears alike. My personal trading plan is to trade light this week, I hope to continue to hold my longer term bullish trades as the market appears to be setting up to make a trending breakout move this year, but my stops will be key.
Are you still using Muathe and stockbee principles for trading....?
ReplyDeleteMuathe is used more for scanning than for any particular setups. But once you train your eye as to what is power, it's not that necessary to specifically scan for it because you can see it on the charts. I use a lot of stockbee's techniques, especially related to price contraction. That has been one of the elements of the setups, I've worked out. However, I will buy breakouts and pull backs somewhat different from him. I'm more into using stage analysis as a framework for a trade. To that end, I prefer early stage 2 stocks and will pass on otherwise decent setups that have been in stage 2 for a longer period.
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