MARKET MOOD: Yellow
The summary below is my interpretation of the data in the ‘Market Mood Log’ above:
- Indexes Shift To Upward Bias: This week each of the indexes shifted from Sideways to Sideways Plus and/or from Sideways Plus to Uptrends. The last couple of weeks we’ve talked about the potential for the market to move straight up and climb the ‘wall of worry’. So far, that’s exactly what it has been doing. The S&P 500 and NASDAQ are above major levels of resistance. The Russell, NYSE, and Dow are all perched right around their 200smas. The price action has gone through a character change since the sell off began in January. Price is much tighter and more controlled.
- New Highs outpacing new lows but baby steps: New highs are outpacing new lows on the NASDAQ, but its taking baby steps. New Highs were in the 50s most of the week while new lows were in the 30s. A definite improvement but its taking time. The New Highs on the NYSE are a lot better. 135 vs -18 on Friday. We’ll see if that continues.
- Distribution continues to fall: There have only been 2 distribution days in the last 2 weeks on the S&P 500 and none on the Dow.
- There are 33 stocks total on the trade ideas list. After such a big run on the indexes without taking much of a breath, it makes sense for the setups to be fewer here. I’m seeing several solid ‘B’ level trades, one ‘A’ level trade in XPOF, and a couple of longer term trades.
- Open Trades: I have 5 open swing trades (6 trades total if you include Bitcoin). Swings in stocks include MATX, RS, AMPH, AQUA, and GFS. I cut UNH last week a little higher than breakeven. It had flashed about 10 danger signals and hadn’t moved. Since then its recovered but I’m not looking to get back into it at this point.
HOW I’M PLAYING THIS HAND: While I do want to continue to take quality setups as the market presents them, I don’t want to get overly aggressive should the market pull back. I’m also cognizant that of my 5 open swing trades, only 1 (MATX) has hit any scale outs. We’re in a yellow market condition which allows me to open up the total portfolio risk (2-3%). However, the yellow condition is just getting started and could quickly revert back to red if new lows start overcoming new highs (seems about 50/50 presently).
I’m putting orders in for XPOF, SEDG, and AMD (long term). See action list for details.
Checkout the charts of the indexes below.
MONTHLY CHARTS (indexes) Over all Direction = Sideways: https://www.tradingview.com/x/BFS871R1/
WEEKLY CHARTS (indexes) Over all Direction = Sideways (positive): https://www.tradingview.com/x/7j8stLGa/
DAILY CHARTS (indexes) Over all Direction = Sideways (positive): https://www.tradingview.com/x/Om4MkDby/
(on the lower right is FFTY, the ETF that tracks the IBD 50)
MARKET MOOD REVIEW
Trade Ideas, setups for the week ahead and group discussion (Mike)