US Macro Update - August 15, 2016

SPY Weekly

The $SPY finished slightly higher & with a Doji candle on the weekly chart above.  A Doji candle represents a neutral candle & illustrates the indecisiveness of the overall market.  The market got a big boost from a beaten down retail sector with Macy's ($M), Nordstrom ($JWN) & others beating on  their quarterly earnings.  The $SPY looks good overall with both the 10 Week & 50 Week Moving Averages rising.  I'm waiting for a pullback to the 10 Week Moving Average (~$211) to add to any long positions.

IWM Weekly

The Small Cap Index is looking to play catchup & break out to it's all time highs above $127.50.  The $IWM is still about 4% below it's all time highs, and if this were to happen it would be a very bullish signal for the overall market.  

QQQ Weekly

The Nasdaq chart has the best look of the major US indices.  The $QQQ has gone straight up since the Brexit scare in June.  I'd wait for a pullback to the $115ish area before looking to add to any positions.  

The US Indices all look good at this juncture.  We are pretty much finished with the majority of earnings season at this point.  The market will be reliant on central bank speak/decision-making and economic data in what should be light trading up until after Labor Day Weekend.  I won't be adding to any long positions in the $SPY unless we get about a 2-3% pullback.  

Good luck & God bless!

US Macro Update - August 10, 2016

SPY Weekly

The SPY broke above $213.78 a few weeks back & has held up nicely.  The 50 Week Moving Average is finally perking up for the first time in the past year.  The 10 Week Moving Average (Red Line above) is sitting between $210-$211.  I'll be waiting for a pullback to this area before adding anything to my position.  Overall, it is a very bullish chart.

GLD Weekly

Gold is also still acting very healthy.  The precious metal took a hit on the big NFP/Jobs number last Friday, but this is likely just a healthy pullback before another move higher.  

TLT Weekly

Long dated Treasuries have been a huge performer this year.  They are digesting the recent breakout above $138.50.  As long as it holds the $136.50 area on a closing basis, I like this to also continue higher.  

The US indices are hitting new all time highs almost on a daily basis.  The fact that safe havens like the $TLT & $GLD are still holding up well, gives me pause & is preventing me from aggressively adding to any long term US equity positions.  Overall I believe the US markets look complacent, but like them to continue to grind higher.  

Good luck & God bless!

Taking a Longer Term Approach for Effective Passive Investing

I'd like to introduce the 50 Week Moving Average Strategy to anyone who doesn't want to obsess over each tick of global markets. This is a much more passive approach to investing that utilizes macro investing principles in an effective manner.

The above is a weekly chart of the S&P 500 index dating back to 1999. I used 2 different moving averages in the above chart; the 10 week in Red & the 50 week in Blue. I went back to the year 1999, so that it is easy to illustrate multiple Bear (2) & Bull (2) markets.





Facts about this strategy:

1. If you choose to use this strategy, you will never sell at the very top or buy at the very bottom; however, you will catch the major trends in both directions.
2. You will occasionally get chopped around, but that is where your discipline as an investor comes into play. You must stick with the strategy to make it work & remove all emotion from your decisions.
3. With the use of index funds (i.e. $SPY, $QQQ, $IWM, $FXI, $EEM, etc.), which I highly recommend for this strategy, you will be well diversified.
4. Most index funds pay a dividend. For example, the $SPY is currently paying 2.10% yield at the time of this post.
5. The strategy will beat the market if you stay disciplined.

How the Strategy Works

Its a very simple, passive strategy that will take a max of 15 minutes a week (I know this sounds almost too good to be true, but bare with me). The thought process behind the strategy is to own the market or a particular portion of it when it is acting "healthy." When the market is acting unhealthy, I prefer to invest my money in safe havens such as precious metals & treasuries, but you can choose to keep yours in cash.

1. Buy an index fund that is currently trading above it's 50 week moving average right before the close for the week (I recommend the $SPY). Weekly candles normally will finish completing on Friday's unless it is a shortened trading week. In my opinion, the S&P 500 is the best barometer for the US Market, but if you prefer something different (Nasdaq, Small Caps, China, Japan, Europe, etc.) then by all means choose which one you are most bullish on. Ideally, we are entering a market/index that has been below the 50 Week Moving Average and is crossing above it for the first time in a good while (possible major trend change). This is not a requirement, but you will likely see higher returns &/or get chopped around.

2. As long as the index you bought closes above it's 50 Week Moving Average on a weekly basis, then you do not have to make any changes. It is best to save a chart in any various charting programs available to easily track the weekly market close. I recommend Trading View or Stockcharts.com (both free sites), but any charting program will do.

3. If the weekly candle closes below the 50 Week Moving Average for the index you chose, then sell the full position. At this point you have the option to put your money in safe havens such as Precious Metals or Treasuries (my preferred strategy) or merely leave it in cash.

4. When the index/market regains the 50 Week Moving Average, get back in.

So in summary, you want to be in the market when it is acting "healthy" (my preferred barometer is the 50 Week Moving Average), and out when it is acting "unhealthy." This strategy removes your emotion in investing & completely blocks out the noise and narratives attached to each trading day.

Stocks I'm Watching Monday 8/10

I was on vacation all of last week in the Isle of Palms & had very spotty wifi. I took one position in Diplomat Pharmacy, and well, it wasn't a good one. $DPLO hasn't yet hit my stop of $44.00, but I am behind on the position with an entry of $47.85. I guess this is more of a note to self to not trade without my entire "toolbox" or reliable internet service. I did catch the headlines & noticed we dropped for the majority of the week. In the short term we look lower, but am watching for oversold signals to buy the dip.

The McClellan Oscillator ended the week at -10.55, which is "no man's land" with a bias lower. I'm guessing we head lower in the beginning of the week & start to ascend on Tuesday/Wednesday dependent upon headlines. This sell off seems pretty orderly for now, but caution is always warranted. There are a few troublesome signs out there, like the Russell 2000 closing below it's 200 day moving average & the continued weakness in the Transports & Commodities. Onto the charts I'm eyeing Monday...

Bluebird Bio Inc. created a very large dragonfly doji candlestick on it's daily chart last Friday. This is a very unique candlestick pattern & was found at the bottom of a intermediate term downtrend for $BLUE. The daily chart shows RSI dipping into oversold territory & Stochastics look like they want to cross upwards. I like this above Friday's high of $157.50, with a stop placed at $153.50. Earnings were last Friday, so they are of no concern.

Lions Gate Entertainment had a major reversal on Friday due to an earnings beat. Caution is still warranted in $LGF since all indicators are still in bearish zones (RSI < 50, MACD & Stochastics still with bearish signals). Ideally I'm watching for a retest of the 50 day moving average at $36.92 and even a retest of the $36.00 level to get in. If this does not happen, I'm looking for a rise above $38.15 for an entry, with a stop placed at $35.34.

Silver Spring Networks, Inc. popped last week off of an earnings beat. The RSI is overbought on the daily chart, so I will be watching for a pullback to the 50 day moving average at $12.50. MACD & Stochastics are very bullish for $SSNI. Eventually after a little rest, I think this one can test all time new highs around $15.

Seagate Technology Holdings, Inc. looks to have put in a short term top just above $52. $STX is well below it's 200 day moving average & has been since early May. All indicators are pointed down & look bearish. I will be watching for a weak bounce to slightly above $50 to short, with a stop placed at $52.35 My first target will be a retest of it's recent low around $44.

Boeing, Co. is the world's largest manufacturer of airplanes. If you have been paying attention to the headlines, the transports have been under performing all year long. $BA established a lower high on the daily chart & has proceeded lower. Also, on the weekly chart, $BA had a bearish cross of the 30 week rising above the 10 week moving average. I'll be watching for a weak bounce to the $144 area to short, with a stop placed at $145.75.

Stocks I'm Watching Monday 8/3

The McClellan Oscillator or $NYMO bounced from an oversold reading at the close this past Monday. It never reached the extreme oversold level that I like to trade off of (-80 or below), so I did not take a position in the $SPXL this past week. The market seems to be churning in a very tight range & has been very choppy over the past few months. I've been taking gains when I have them & keeping stops tight in this type of market. I'm only holding a half position in $ARIA, which is a speculative trade. I normally only go with a half position on any spec or levered type security due to the volatility. Going into next week, I have no direction bias, but I do believe we are going to get a big move in one direction or the other soon. My guess is it's to the downside, but that's purely speculation on my end. Onto the charts...

HDFC Bank is a foreign play, specifically India. India is one of the fastest growing economies & is widely considered one of the most attractive foreign markets. $HDB just about tested it's 50 day moving average last Monday & has since bounced back. It looks ready to test it's all time highs above $64/share. Stochastics had a recent bullish cross and is pointing to up; RSI is not yet overbought on a short term time frame. I like this above $62.63, with a stop placed at $61.50.

Ambarella, Inc. has been one of the hotter stocks in the past few years. It's in the semiconductor industry & makes the chip that is in GoPro's cameras (also a very hot stock), as well as many other popular tech products. $AMBA seems to be forming a cup and handle pattern on it's daily chart. This chart pattern is a very powerful one when it plays out as planned. I like this above $118.50 on volume (this would break above the down trend line of the handle in the formation), with a stop placed at $113. Earnings are 9/2, so not a factor.

Ciena Corp. is a technology company that specifically makes fiber optic networking equipment sold predominantly to telecom carriers. $CIEN tested and held it's 50 day moving average last Thursday. It looks ready to breakout to all time new highs above $26 & change. Stochastics is about to make a bullish cross & RSI is pointing steeply upwards, but not yet overbought. I like it above $25.67, with a stop placed at $24.30. Earnings are 9/2; so not a factor.

Incyte, Corp. is in the Biotechnology sector of the broader "healthcare" space. It has been rumored in a lot of buyouts, including Gilead Sciences. $INCY has corrected quite a bit from it's all time high's over $121/share. It's RSI & Stochastics are signaling oversold signals. Earnings are Tuesday, 8/4, before the market open, so if you play this one it should strictly be for a day trade/intra-day scalp. I do not recommend holding through earnings, as is the case with all stocks I watch. I like this above $105.25 with at $102.70.

Fitbit is in the wearable tech space, competing with the likes of Apple & Samsung. It sells fitness bracelets that track & record all of your health data. It is a newer IPO, first hitting the market this past June 18th. Newer securities tend to be more volatile on a daily basis, so this one is not for the faint of heart. On top of that, $FIT reports it's first public quarterly earnings on Wednesday, 8/5, after the market closes. The chart shows a recent test & bounce off it's 21 day exponential moving average. RSI is not yet overbought & is pointing up, while Stochastics had a bullish cross recently. I like this above $47.84, with a stop at $44 even. This would be only a 1-2 day hold with earnings coming up mid week.

Stocks I'm Watching Monday 7/27

The McClellan Oscillator or $NYMO finished Friday at -42.77, which is a bearish reading. We still have not hit extreme oversold levels, so I am expecting some further downside early next week. All of my breadth indicators are looking very weak/bearish including $NYAD at -1427, $TICK at -483, & the short term trading index $TRIN closing above 1.5. If I see these indicators signal extreme oversold readings early in the week, I'll likely buy the dip via $SPXL. For those unfamiliar with $SPXL, this is a 3X levered ETF of the S&P 500. I will keep my stop tight, since levered ETF's are for trading only due to decay & tracking errors. If holding for a long time, you are almost guaranteed to lose with these trading vehicles & they certainly are not for the faint of heart. I put on a half position in Gold (via $NUGT) right before the close on Friday due to the reversal/hammer candle it put in, but that is my only open position over the weekend. Looking ahead to next week...

Five Below, Inc. was on my radar all of last week. $FIVE had a recent golden cross on it's daily chart & has been retesting it's 200 simple moving average after a recent breakout. Stochastics is showing a bullish cross & RSI is perking up. $FIVE closed positive on Friday, which was impressive given the blood bath of the overall market. I like this above $38 with a first target of $40. Stop will be placed right below the 200 day moving average at $36.80. Earnings aren't until 9/8.

Cyber-Ark Software has been acting much better recently as all indicators are suggesting a short term bottom. This is a cyber security play, and this entire space/sector has been very hot for some time now. $CYBR is sitting right underneath it's 50 day moving average. If we can clear this with conviction this thing could really pop. There is also a gap to fill at $65.58. Stochastics & MACD are both bullish and pointing up. I like this above the 50 day moving average at $63.29, with a stop placed at $59.50. Earnings are 8/11.

Calithera Biosciences, Inc. is my speculative pick for the week. $CALA traded above $30/share briefly back in December 2014, but has since traced back all the way to $6.60. Over the past few weeks it has been perking up & closed Friday at $9.03, which is actually above it's 50 day moving average at $8.98. RSI is pointing northward & Stochastics look like they want to make a bullish cross as well. I like this above $9.15, with a stop placed at $7.85.

JinkoSolar Holding Co. is in the Chinese solar sector. Chinese markets have been very volatile as of late. In my opinion, I see them continuing to breakdown after an astronomical rise the past 1.5 years or so. $JKS closed below it's 200 day moving average on Friday & looks like it's ready to retest the $23 area with a possibility of breaking down. Both MACD & Stochastics had a bearish cross recently. Keep an eye on oil prices whenever watching a solar name (solar companies move in conjunction with the price of oil traditionally). I will be looking to short this name at $23.56 with a stop placed at $24.85.

Goldman Sachs failed to put in a new high recently & looks like it wants to break down. $GS had a bearish cross on both MACD & Stochastics in the past few trading days. It also closed below it's 50 day moving average. I will be looking to sell it at $207 with a stop at $211.50. First target is $204. 2Q15 Earnings have already been reported.