Market Wrap Up & New Location

First off, I would like to sincerely thank all of you who have read my postings over the past few months, and have rated them highly enough to the point where I won Peanut of the Month.  All of the comments are appreciated as well (shout out to lindsay).  Above all else, my goal is to provide ideas and analysis that improve your performance and overall perspective on the market.  Below you will find my market wrap up from this past Thursday, April 1.  I will also periodically post any interesting charts or analysis that I have from now until Monday’s opening bell.

MARKET SUMMARY

A new quarter and a new month, yet the same market action we have seen for many months now of choppy trading throughout the day and a final bid to push us higher into the closing bell.  The $SPX closed Thursday at 1178, up 0.74%, as it appeared that more bears than bulls were afraid to hold positions over the long holiday weekend.

My strategy since for the past two weeks has been one of short term caution, but hardly outright bearishness. I do not consider this a wishy-washy stance, and given the performance of the market and my portfolio, I believe it has been the best scheme.  I have been long some select names with stellar charts, like $VLTR. $CROX, $ETFC and $PRGN. I also have around a 25% cash position, as well as a small hedge being double short the $QQQQ, via owning $QID (which was green on Thursday).

After more than a week and a half of overall sideways market action, on Thursday we came in contact with the trend line since the beginning of the rally off of the February lows. Obviously, the fact that we held that trend line is a bullish omen for the broad market.  The chart below should illustrate this point.

I still would like to see a precise bounce off of the 20 day moving average as well, which is currently sloping upwards just below 1160.  Unless we go parabolic at the start of next week, I expect this test to occur.  On  the whole, the $SPX looks like it is working through a healthy bullish consolidation period after an impressive rally since mid-February.  To confirm any bullish move, of course, we would need to hold above 1180 to negate last week’s outside reversal day, which I detailed in previous posts (see Peanut Gallery).

POSSIBLE SECTOR SHIFT BY INSTITUTIONS

The technology sector, however, is not quite as impressive.  What I sense is going on is that institutional investors are shifting money into the energy sector, while taking profits in technology stocks.  From a seasonality standpoint, this makes sense as tech companies have already reported their holiday sales by now. Moreover, we are headed into peak driving season, and many energy stocks have lagged both the broader market as well as the bullish action in the price of crude oil.  So, I believe this a trend to keep an eye on going into next week. As an individual trader, quickly identifying where the big money flows are headed (and going away from) can be crucial to banking coin.  The chart below should be evidence of the relative weakness here. Note that despite Thursday’s rally, $QQQQ finished literally unchanged on the day.

I will continue to hold $QID as protection against tech taking the whole market down with it.  If we do selloff, I believe tech will lead us to the downside as a lot of hot money flees the sector.

NEW HOLDING

Thus, I believe energy will be a key place to look at next week. If I see further strength, I will look allocate capital there in anticipation of a seasonal bull run in those stocks.  As far as Thursday is concerned, I bought one new position, going long $PSYS, which is a firm that provides inpatient behavior and mental healthcare services.  This firm has been heavily rumored to be a takeover candidate by a private equity firm. Moreover, this could also be a play on the newly passed healthcare bill providing more coverage to more people with mental and behavior illnesses.  Of course, the chart is the key factor for me. And I believe it is a great setup.

When a stock can consolidate with this much ease at prior resistance AND after a huge volume spike up, that tells me the big buyers are not scared of a sharp dip. Instead, they are comfortable still being in the name and expect higher prices from here.  As always, keep a stop loss if you choose to buy a high bull flag, since in the event that the flag fails, it is often an ugly affair.

The long weekend has allowed me to look at countless charts to garner a broad perspective of the market. I continue to see many bullish setups. Time away from the market is an excellent opportunity to take a mental break from the pressure of intraday trading.  However, it is also a good time to think about the market in broad terms, seeing the forest for the trees.

Again, I appreciate the feedback that I have gotten from all of you, and I hope you find my ideas helpful.