Market Report 2/15/16

Last week was just plain ugly as the market sold down to retest the January lows. But there was a bright spot at the end of the week. The successful retest then reversal right when things looked the worst has set the market up for a near-term rally (most likely).

On the daily chart of the SPX below notice the retest of the low, the trendline break and the price that’s pushed right up to the 9-ema. The black line is the next little bit of resistance it needs to push though.

SPX_D_2142016

I’m thinking the price ends up forming a sort of “W” pattern and works it’s way up to meet the falling 50-day moving average, perhaps resembling the arrows I drew on the chart. After that we’ll have to see what happens.

It most likely won’t be a straight line and with the current 14-day ATR at 38 points there will likely be some big swings day to day. But having successfully re-tested the lows I think it’s finally time for a bit of a relief rally.

If for some reason it breaks below 1800 then all bets are off. There are a lot of issues out there spooking the market and that’s the sort of environment that can lead to a sudden plunge. A lot of last week was spent worrying about the financial stocks – with focus the European banks. If something bad happens unexpectedly then it could derail any rally attempt.

However I (once again) am optimistic that there’s a rally forthcoming and all of a sudden I’m seeing quite a few stocks that look to be setting up. I’m not expecting it to be a slam-dunk but everything seems to be lined-up for a rally here. Keep in mind that the long-term chart is still bearish so the idea is to try to trade rallies and then get out. I want to take a few new trades and close the open trades we have in the next couple (few) weeks.

I posted a handful of new ideas in the Chart Feed and I have a few others that are shaping up. The funny (ironic) thing is that my favorite idea isn’t posted there because they are releasing earnings Tuesday. Just for fun here’s the chart, but I wouldn’t touch it ahead of earnings. I made the chart right before I looked up the earnings date.

ATHM_D_2142016

I ran one of my new favorite scans – stocks that have been trading below the 9-ema and are beginning to break back above it and that one sure fits the bill. Surprisingly there aren’t really that many but all it will take is a little bit of strength and there will be a TON more. So many are right on the cusp. Just because a stock moves over the 9-ema doesn’t mean it’s just right – that’s just a decent starting point and then I look at the pattern and other things.

I’m noticing that some biotech stocks are starting to look like they are due for a bounce. JUNO was my best idea last week and I came close to pulling the trigger but the overall market was so “sketchy” early in the week I decided to hold off. I did post it in the Chart Feed and did an update today.

I’m also seeing some potential in other sectors – some of the beat-down energy stocks (which scare me) look like they could put in a near-term rally. Actually some of the material stocks and industrials are showing relative strength too. I think there are going to be some big movers to the upside fueled by an oversold rally and short covering.

Gold and silver (mining) stocks have obviously been the favored sector the past week or so but they look parabolic and are likely due to pull back. I’ve noticed that they seem to be trading inversely to the overall market and were all of a sudden acting as the “safe haven” plays with all this talk of negative interest rates. If the market rallies I expect these mining stocks to come down and perhaps set up again in the future.

But all this a topic for discussion on the shows this week. I’m off to take my Valentine out to dinner so I can’t get into all the other things on my mind, unfortunately.

I hope you have a great 3-day weekend and I will see you on the show Wednesday. I decided not to do a show Tuesday because I want to focus on the next couple trades I have in mind and need to stay focused with no distractions.

The good news is that I solved the issue with the Email Alert System and I’m going to send a test out tomorrow – so look for that.

I’ll see you Wednesday morning on the show. I hope you can join me.