Checking Out the Junk in the Trunk

The high yield corporate bond and junk bond ETF’s have both gotten slammed in recent weeks. Beyond that, they could easily be bear-flagging here, seen on their respective daily charts, ripe to break lower yet. Keep an eye on HYG JNK for potential shorts.

In addition, there may be larger issues to consider if the weakness persists.

Consider this article, for example.

Hat Tip: Scott Barlow @SBarlow_ROB

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While equities in the U.S. struggle this morning, many China and Brazil names are impressive. BIDU is printing new all-time highs, while EWZ is hovering near multi-quarter highs.

Here in the U.S., the small caps in the Russell 2000 Index ETF are finding resistance at the $114 level we observed multiple times last week. I am still inclined to hold off on fresh longs for swing trades until the small caps can improve. At a minimum, it is likely bulls need to hold $113 to avoid a test of last week’s lows.

As far as intraday/day-trading action, China name SINA figures to be showing good momentum today from a long base bottom attempt. Keep an eye on it throughout the session for quick entries.

The following is just a small excerpt from my latest Weekly Strategy Session (please click on that hyperlink for details about trying it out). which I published for members and 12631 subscribers this past Sunday. 

 The S&P 500 Index, despite Thursday’s sell-off, closed last week once again above its 20-day simple moving average (orange line on daily chart, below), right near recent all-time highs. On its face, this action would seem to be wildly bullish. Indeed, each and every single sell-off we have seen in recent memory has been short-lived and met with eager, resilient, and potent dip-buyers.

That type of pattern has punished overly-aggressive short-sellers who do not have the discipline to quickly close out losing positions in the face of sharp, snapback rallies.
Beyond that, plenty of marquee, growth issues which corrected sharply this spring have not fully-healed the technical damage sustained. 

Still, Friday’s rally is a good reminder that the risk to the cautious approach is that we see a melt-up to perhaps inflict maximum pain on bearish or underinvested market players. Should that occur, leaders like FB GOOG are likely to prove profitable for bulls. Compared to other prominent issues, such as NFLX PCLN TSLA Z, I view Facebook and Google’s charts as more promising to lead any further strength in the market. Note that Facebook’s earnings are this Wednesday.

Please click here to continue reading

Futures are slightly red as I write this, which means much of nothing. For the real story about this market, check out this weekend’s Weekly Strategy Session, which I just sent out to members (click on that link for more information).

Keep an eye on some steel stocks this week, as AKS has been punishing the numerous shorts in the name. Earnings are coming up at the end of the month, though, which is a good reminder to check earnings for all of your current and prospective holdings.

I would imagine the Nasdaq’s numerous marquee names reporting earnings this weekend and beyond should be a crucial moment for the market into the end of summer.

What are you looking at this week?

https://www.youtube.com/watch?v=ypMBk8FpVy0

The Sting (1973) is a top twenty film for me, as Paul Newman and Robert Redford team up to pull the con of all cons versus a criminal banker.

Robert Shaw and Charles Durning add to the gritty yet playful nature of the period piece set in 1930’s Chicago, where the slightest hand gesture can be the tipoff that you are about to get fleeced in a horse race.

Check it out.

Via Youtube:

Directed by George Roy Hill and starring Paul Newman Robert Redford Robert Shaw Charles Durning and Ray Walston Set in the 1930’s this intricate caper deals with an ambitious small-time crook and a veteran con man who seek revenge on a vicious crime lord who murdered one of their gang. Universal – 1973

The film Memento (2000) centers around a man who suffers short-term memory loss, and must wake up every morning more or less starting from scratch in his quest to uncover the identity of the man who he thinks murdered his wife. With the stock market selling off aggressively yesterday, followed by today’s equally powerful move higher, one has to wonder whether Mr. Market is facing a similar predicament to Guy Pearce’s character in the film.

Indeed, the past two days of market action have not been momentum trading at all, but rather “Memento trading” with yesterday’s concerns being thrown to the wind along with caution today.

I covered my two shorts inside the 12631 Trading Service for 1-2% losses each, containing my downside and opting for full cash into the weekend. I am not seeing too many quality long setups, but will reevaluate that over the weekend for my Strategy Session.

Enjoy your summer weekend.