Stay on the right side of the trend
There remains a defensive rotation going on
Relative Performance Breakouts - XLF, XLV, XLP, XLRE
Under performing Sectors - XLB, XLE, XLI,
Technology at support within a nice upchannel
Consumer Discretionary dipped within a rising uptrend
The Risk no one is talking about
Keith Dicker is the President of IceCap Asset Management. This summer he has made several presentations entitled "The Risk no one is talking about". The presentation here is from one he gave to an investment club that I found on the web.
Mr. Dicker is plain and direct speaker that impressed me with both his style and content. His "IceCap Global Outlook" newsletter ( Free) is read by well over 100,000 folks in over 50 countries. Lots of people pay attention to what he has to say.
Rather than give you the spoilers, invest 30 minutes and watch the presentation. You may or may not agree with Mr. Dicker's arguments, but I guarantee that you'll learn something.
Below the video are the powerpoint slides from his presentation for your convenience. Hover your cursor on the upper right corner of the slider. Use the navigation arrows to advance each slide.
I hope you like the presentation.
Positioning for US Dollar Strength
I took a long position in the US Dollar yesterday. I bought UUP Jan 2019 24 CALLS for $1.35.
Take a look at the chart and see what you think.
Knock on effects of a stronger US Dollar
Time will tell how it plays out, but for now, this is my story and sticking to it until price tells me I am wrong.
A couple of weeks ago I presented a thesis that surmised that the recent run up in XLP names had run its course and that the counter -trend rally was out of gas. I took a short position in $KHC via puts that turned out to be a nice little trade. Knowing that $KHC reports tomorrow, I closed the trade yesterday for 58% gain.
Although the short trade worked out, XLP has shown remarkable relative strength. I did my weekly relative rotation study of the SPDR Sectors. Below are my findings.
Top Performing Sectors
Where is the strength within $XLP
I drilled down and did a study of the industry groups within the XLP to see where the strength was coming from. You can see from the rotation graph that the relative strength is well distributed. All but one industry group ( Vintners ) is either improving or leading.
Relative Performance Breakout vs SPY
Relative performance has broken down trend resistance for the first time in 9 mo.
I hope you found the study informative and useful.
Happy Hunting and Good Trading
Watch Amerisource Bergen closely here - Key Spot
The stock is testing the recent lows of around $82 for the third time. Regardless of whether you are of the bullish or bearish persuasion, this is an important spot. If it bounces here you can use this location as a stop. Likewise, if this zone of support fails, its a perfect spot to get short with a clear stop close by.
I have no position but depending on which way this breaks in the coming days will help me decide my positioning.
Set yourself some alarms so you don't forget!!
Thanks for stopping by!! Hope it helps!
Housing Sector - A Quick Look
The homebuilder industry group ( $DJUSHB ) peaked at 1000 in January and is now trading around 775. Roughly a 20% decline. A similar decline can be seen in the $ITB Home Construction ETF.
More recently all of the major home builders reported earnings. Most reported numbers somewhere between disastrous and ok. These names are trading either at 52 week lows like $TOL $KBH, and $BZH or near the bottom of their recent trading ranges and pushing the downside. I could only find a single exception to the broad picture painted above. That is DR Horton.
Zooming in on DR Horton
$DHI had a very nice earnings report and was rewarded with an 11% pop. THat brought price up to the top of its trading channel that has been drifting lower for the past 4-5 mo. That is all well and good but to my eye here are the other factors that make me think this is a high-water mark for $DHI short Term.
Bearish Factors from the Chart
The question becomes does $DHI breakout and lift the rest of the sector or are the poorly trading names within the sector reflective of some problem that will eventually reach DHI and pull it back to the the rest of the group?
The chart gives me a very clear picture and a definite line in the sand to shoot against for a bearish trade. If price closes above $44.50 - $45.00 the thesis is wrong. RORO....right or right out !! I love this type of set up.
I have no current position but I plan to target the Sept 44 Puts currently priced at $2.08 mid point. It will be a small position. My stop will be $44.50 on a daily closing basis.
More on my Trading Process
I am a top down analyst. I believe that the dominant trend of an an industry group carries more weight than an individual stock within the group. In this case, I think $DHI is an outlier and that it's recent ER spike / momentum can't be maintained. THe weight of the group will win. As I have said many times, having that clear line in the sand is an important key. I will know right away if I am wrong. If that happens, just move on to the next set up.
Happy Hunting and Good Trading
Airline Sector looks poised for further advances
Airlines are in the Industrial Sector and are tracked by $DJUSAR, the airline industry group. I have a chart of $DJUSAR below for reference. Since January, the group has been trapped in a descending wedge. Now however, the group looks bullish to my eye. Her's why:
Looking quickly over the charts it looks like DAL, HA, LUV, SAVE, and UAL have the strongest charts. Over the coming days and weeks I will be looking for an objective long entry within the group.
Thanks for reading!!
Happy Hunting and Good Trading
Looks like a Double Bottom in Sanderson
Sanderson Farms has been in a persistent downtrend for a while. But now with a back check to the recent low, it looks like a double bottom is forming. Price re-tagged the low but with bullish divergence showing on the RSI and PPO momentum indicator.
I've taken a small position in the Aug 100 Calls. I paid $3.33 They are slightly higher now
My stop is the recent low. My target is 107.50.
The Crack Spread and Refiners
The Crack Spread is the difference between $WTIC and $Brent crude pricing. The wider the spread, the better it is for refiner pricing and profitability. The spread went parabolic this Spring and the refiners went nuts. Now the spread has pulled back to a rising trend line and appears to be heading higher; good signs for the refiner group.
Refiners move together
If you look at the charts below, you'll see how similar they all are. Ramp, orderly pull back and now turning higher. I like the group and think they'll continue moving higher if the crack spread continues to cooperate.
Today, I got long PSX $115 Calls
Take a look at the charts. A lot to like in my opinion
Good Luck; Hope it helps
Thanks for reading!!
It's not my place to pontificate about Facebook's earnings miss. It is however a good reminder about why I dont hold stocks through earnings. A lot of hard work and profits can be erased in a few seconds. I wrote about "Defining your Game" a few days ago. Not participating in binary events with no edge is one of my rules.
The main problem on the earnings and conference call is a deceleration of earnings. This in turn will require a re-rating by the analysts. Because Facebook is so widely held by institutions it will be important to see how the name trades over the next few days. It may be that the problem is contained within Facebook. It could however result in a de-risking of FANG names within the institutional portfolios. We will have to wait and see.
Key Technical Levels
Facebook is set to open around $180. The key place on the chart for me is $170. This is the level the long term weekly trend line intersects. So a weekly close tomorrow would be a significant "save". Closes below $170 open the door to re-test the mark lows down near $150.
Amazon and Intel both report today. Their key levels below. These names, along with Facebook are key components within QQQ. Anything that happens to the individual names will ripple through the Q's