Trading Notes: Calendar Week Of October 26Th

Friday, Oct 30th

*  Stocks continued their upside, hitting novel highs for this leg fifty-fifty equally nosotros continued to reckon precisely about continued lagging from pocket-size cap shares as well as from interest-rate as well as commodity-sensitive issues.  Still, alongside honor to the SPX, corrections are occurring inwards relatively apartment fashion, creating launching pads for fresh moves higher.  As long equally pullbacks are occurring at successively higher levels as well as nosotros expire along to brand fresh cost highs, buying weakness continues to endure the favored strategy.

*  I late compared cumulative upticks/downticks for the Dow stocks versus the NYSE Composite.  The Dow ticks need hold been powering to novel highs, whereas the cumulative NYSE ticks need hold remained flat.  It’s yet precisely about other indication that the bull motility is most robust amid large cap issues, alongside smaller cap issues lagging. 

Thursday, Oct 29th

*  Stocks began the solar daytime quite strong, alongside an NYSE TICK distribution skewed to the positive side.  When nosotros instruct multiple readings > +800, it’s by as well as large an indication of institutional buying, peculiarly when accompanied past times inwards a higher house normal volume.  That forcefulness returned next the reflex selloff afterward a Fed annunciation perceived equally hawkish, alongside solid breadth as well as an expansion of forcefulness to the pocket-size caps.  Once over again it’s a province of affairs inwards which short-term pullbacks that need hold the bulk of SPX shares below their short-term moving averages halt upwardly providing expert long side entries.  Those pullbacks are too occurring at successively higher cost lows which, equally noted yesterday, gives the create goodness of the dubiety to the bulls.

*  I’m keeping an oculus on the strong USD, equally a trouble solid Fed as well as an ECB as well as BOJ soundless inwards QE means should contribute to farther USD strength.  That puts pressure level on EM countries tied to USD, essentially tightening their weather condition fifty-fifty equally their economies are slowing.  That could pose farther challenges for PRC inwards particular.  Note overnight bearish cost activity inwards Asia today.

*  Tuesday saw 460 stocks touching on fresh monthly lows; yesterday nosotros had the strong cost activity as well as 306 lows.  If the rally really is broadening, nosotros should non furnish to these levels of novel lows; that’s something I’ll endure watching closely.

Wednesday, Oct 28th

*  I’ll endure tweeting from the QuantFest conference tomorrow; I similar what InvestiQuant is doing alongside identifying edges at the intraday, overnight, as well as swing levels as well as aspect forrad to having something to study this weekend.

*  Tuesday saw precisely about farther correction on farther irksome trading, alongside continued breadth divergences amid larger as well as smaller cap stocks.  Looking at the information from Index Indicators, nosotros tin reckon that nearly 67% of Dow stocks unopen inwards a higher house their five-day moving averages but alone nearly 23% of pocket-size caps as well as 34% of midcaps.  Yesterday was the starting fourth dimension recent solar daytime where to a greater extent than shares really touched monthly lows than highs.  While I create intend nosotros could reckon farther cost forcefulness from hither (I give create goodness of the dubiety to the bulls when short-term oversold weather condition are occurring at successively higher cost lows), that forcefulness is probable to endure selective, accompanied past times divergences.  

*  My working hypothesis is that we’ve entered a “Nifty Fifty” form of surroundings where, amidst slowing global growth, investors attempt rubber large caps that offering prospects of growth as well as yield as well as avoid everything else.  Hence the forcefulness inwards the Amazons as well as Googles as well as avoidance of retail, energy, as well as smaller cap shares.  I’m watching breadth closely to reckon if that hypothesis is supported over time.  In general, my leaning is to endure long the large caps on short-term corrections as well as lighten upwardly on short-term strength. 

Tuesday, Oct 27th

*  Thanks to Michael Covel for a stimulating podcast interview.  I’ll postal service the link i time it’s up.  His archive of 390 podcasts is an impressive torso of work; rattling worth checking out.

*  Mon was an unusually narrow trading day, alongside book inwards SPY slowing to its lowest story inwards weeks.  Given anticipation of a Fed annunciation on Wednesday, nosotros could reckon farther standing aside inwards today’s trade.  So far the marketplace has been ascent on superior volatility as well as book as well as correcting on lesser volatility as well as volume, creating relatively apartment corrections.  That, of course, is what helps sustain uptrends.  We need hold a expert amount of economical information out this week, on transcend of the Fed as well as Bank of Nihon meetings.  I don’t await the irksome merchandise to expire along throughout the week. 

*  I rest unimpressed alongside the activity of pocket-size caps (IJR) as well as midcaps (MDY), equally reflected inwards the recent failure of the Russell 2000 Index (IWM) to brand fresh highs.  Note too the recent weakness inwards stone oil as well as inwards release energy shares (XLE), equally good equally the weakness inwards retail shares (XRT).  I instruct concerned nearly the upside when the ascent tide is non lifting all boats.

*  Here’s an interesting statistic:  During 2015, when fewer than 30% of SPX stocks need hold traded inwards a higher house their five-day moving averages, the side past times side 5 days inwards SPX need hold averaged a gain of +.76%.  All other occasions need hold averaged a five-day loss of -.21%.  (Raw information from the first-class Index Indicators site).  Waiting for short-term forcefulness earlier entering on the long side has been a losing strategy, as well as waiting for short-term weakness to instruct into on the curt side has too lost money.  That’s a expert argue why the merchandise based on fright of missing moves has been as well as thence deadly.

Monday, Oct 26th

*  If I were edifice long-term positions inwards companies equally investments, I’d select companies that give a high story of solar daytime of the month alongside employees.  This is why.  If your trading is your business, you lot are both director as well as employee.  Does your management really engage you?  Vitally of import topic.

Great listing of takeaways from the recent Stocktoberfest conference from Howard Lindzon.

*  Stocks continued their forcefulness on Friday, equally nosotros hitting novel highs for the recent upleg as well as fresh three-month highs expanded to 483, the highest since June.  This suggests that momentum continues strong as well as that increases the probability that nosotros volition ultimately reckon novel highs inwards stocks equally role of the electrical flow cycle.  We need hold pulled dorsum from Fri highs inwards overnight trading as well as precisely about short-term corrective activity tin endure expected afterward the recent strong performance.  So far, however, dips need hold been bought aggressively.  The terminal 2 occasions inwards which to a greater extent than than one-half of stocks dropped simply below their three-day moving averages need hold resulted inwards strong buying.

*  Ultimately 2 factors look to endure leading stocks higher:  solid earnings (most late from large cap tech names) as well as rattling accommodative monetary policy globally.  That, combined alongside the perception that the Fed is unlikely to heighten rates, has resumed the QE trade.  Of course, equally fiscal weather condition improve, the Fed becomes to a greater extent than probable to heighten rates inwards December, as well as thence nosotros could reckon interesting year-end dynamics.

*  During this most recent motility higher, the stair out of upticks/downticks that I rail for all U.S. stocks (red delineate on nautical chart below), non precisely NYSE issues, has remained relatively flat.  This is because we’ve seen recent relative weakness amid pocket-size cap issues.  I volition endure watching that closely early on this week, equally an expansion of pocket-size cap forcefulness would broaden out the rally as well as back upwardly the thought of a continued upside, whereas a broadening of weakness (larger caps next pocket-size caps lower) would indicate to a greater extent than meaning potential for correction. 

 

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