Market Report 6/20/16

I was reading over last week’s market report to review my thinking and one paragraph stood out.

“Everything hinges on SPX 2100 – that’s the major over / under level until further notice – until we see 50 points above or below it. Last year 2100 got crossed like 65 times. It was like a magnet and right now its like deja vu.”

I’ve mentioned that level in the past and that note from last week still seems important.

I also noticed that I got a bit overly worked up about the Fed meeting and it ended up to be a non-event for the most part. Except for the part where they backed off raising rates anytime soon. As a matter of fact, the post-mortem seemed to indicate that they have essentially given up the idea of “normalization” for the foreseeable future.

You would have thought the market would have ripped right through those all-time highs right?

But wait – the tone of the Fed now indicates that “everything is not perfect” and there’s a reason they’ve backed off the “seven rate-hikes in the next two years” rhetoric from last month. The economy is expected to grow around 2% as far as the eye can see according to Bullard and that’s not exactly robust growth.

The implications of this new Fed stance are far-reaching and it will take time to digest, but I’m not going to get into all that here. I suggest you check out the CNBC interview with Jeffrey Gundlach last Friday. It was profound and he is one smart guy.

Moving on, I’m starting to sound like a broken record when I say “the SPX is trapped between support and resistance” but it is what it is. Here’s the daily chart.


You can click on that chart for full-size. A few weeks ago I drew all those little black circles at the “peaks” and pointed out how a new all-time high might not be a slam-dunk. Even though it got as close as just 2-ATR’s from the high recently, I noted that everytime it got up near these levels it got turned back.

Right now with the SPX below the 9-ema and the 9-ema sloping down, the market is in “pullback mode”. That’s a fast moving average so that can change quickly. This week we have the Brexit vote and the financial media seems fixated on that. It’s always something. Last week it was the Fed announcement and end of quarter options expiration. Once we get past Brexit then we can look forward to the 4th of July and then we’ll be headed back into earnings season.

Could we end up with something similar to last year where the market spent 8-months chopping around in a wide rage but essentially going nowhere? That seems like a possibility. Of course we know what happened subsequently – the market dropped -11% in five days last August as I noted on this chart here last week.

There’s no point in trying to overthink or guess how the market will react to the Brexit vote this week, it’s just best to go with the flow and keep in mind it could be a non-event or it could move the market substantially. It’s probably best to tread cautiously and not have a bunch of open trades though.

Speaking of which we had a great trade last week in CWEI and I sure hope you caught it. After I sent the alert out Thursday you had the rest of the day to get in at the entry or even a slightly better price. Friday morning it blasted through the target during the live show and I closed it out for an +11% gain. The funny thing is that eleven percent is eleven percent whether it takes a stock three months to go up that much – or if it happens overnight.

Keep that in mind because I’ve talked to traders / investors in the past that aren’t impressed when a gain happens that fast. There’s a mindset that it’s only good if a stock takes it’s time to make a significant move. I knew CWEI was one of the most volatile energy stocks and I liked the way it set up right on the 50-day. It won’t surprise me to see it move a lot higher over time – if you can stomach the volatility.

Speaking of which, I looked through TONS of charts this weekend and I have to say there are a LOT of energy stocks that look great. The large majority of them have a perfect pivot low on Thursday, following a nice deep long-duration pullback. It doesn’t get better than that.

I see so many that it’s hard to pick and choose which look best but I’ve narrowed it down to a dozen that I think could be tradeable – IF the pivot low holds. Last week’s low on any of these is where the stop goes.

Click Here to see a dozen energy stocks that have decent setups going into the week

I’m really favoring DVN because Thursday’s pivot low was right at the intersection of the 50-day and 200-day moving average. A couple others on that list are at the top of my watchlist for trades this week.

Keep in mind that the price of oil drives these stocks and it had a big rebound Friday. If oil drops significantly then those pivot lows aren’t likely to hold.

I have also updated the Focus List with new ideas so be sure to check that out. If you’ve been watching the shows or keeping up with the Chart Feed you already know that TNET, RYI and OKE are my top “persistent uptrend” stocks right now. I figured it only made sense to pot them in the Focus List. You will see JWN in there too and that’s worth watching this week for a move over the 9-ema and a bounce. A few of the retailers look set for another small bounce but what I like about JWN is that it’s clear where the stop goes. It made a double-bottom.

I came across a few other really constructive chart patterns too, check them out here

It’s real easy to just link to them at FinViz like that but you really need to pull them up on your own charts so you can zoom in and out to see the real picture. I particularly like the stair-step pattern on GV and will be keeping a close eye on it for an entry.

Of course I’ll go over all these and some others on the live shows this week and we’ll see which ones set up just right for a good entry.

There are so many good looking charts right now…

I keep all my best ideas in a watchlist at ToS so I can keep track of them and see how they are acting in real-time during the day. Before I forget be sure to check out this “post” I did in the Chart Feed on how I have my 17/43 scan set up in ToS. I’ll be posting new charts in there and that post will get buried but I thought it was well worth posting. It’s one of the tools I use to help find new ideas during the day.

Join me for the shows this week and we’ll go over the charts and discuss all these stocks I like right now. If for some reason the market tanks because of Brexit then all bets are off. But that’s what stops are for anyway.

Lately I find myself thinking “where would I put the stop?” as the first thing that comes to mind when I see a chart I like. I didn’t used to do that…

See you on the inside!