HI Financial Services
Mid-Week 02-25-2014
With the possible exception of things like box
scores, race results, and stock market tabulations, there is no such thing as
Objective Journalism. The phrase itself is a pompous contradiction in terms.–
Hunter S. Thompson
What has been happening
so far this week?
What a great start yesterday! A lot of people asked why I took option
positions off last Friday and then added them back on this morning or after the
first hour of the market yesterday.
Simple when you have years of experience in the market. Some simple patterns let me know what I can
count on as a reaction to those patterns.
Last week was a down week in the market and no short
covering for option expiration positions.
I’ve noticed that after a down week and options expiration. When I notice this pattern and a down day on
the options expiration Friday my thought is all the buyers are out. The good news is that the buyers will come
back again to start the next month of options expiration on Monday. Allowed me to exit long put protection
options on Friday and add them at a higher strike price out on the current
month of options expiration. Also
allowed short put options to be assigned and then make a little run on Monday.
Where will our market
end this week?
I would expect a continued rebound for the rest of the week IF we
can break 1850 on the SPX. To have the
S&P 500 break that high would push our market to the round number of
1900. I expect we can be there by the
end of the week. The rally is still on
and our week is going to be run by two things:
Economic reports getting better and the retail sales earnings not being
as bad as thought. My best example would
be M – Macy’s today. Bad quarter and because it was blamed on the
weather, not as bad as expected and an inline guidance it was up slightly
today. Look at earnings and economic
reports to judge the week
DJIA – We are holding
support at the 50 SMA. Technically still
bullish but the market is looking for the next catalyst.
SPX – We hit an all-time
high but we were not able to hold the 1850 resistance position. Yes be broke it for a day but one day a trend
does not make
COMP – Still leading the
major indexes and continuing the upward trend.
We are staying within the trend channel and I would expect to see the
index continue higher.
Where Will the SPX end February
2014?
02-25-2014
I am looking for 1900 on
the SPX by the end of the week.
02-11-2014
Looking for the
bounce. We didn’t quite test down to the
1710 level and we still might but right now we look to be in recovery
mode.
02-04-2014
I NEED to have an
expectation to set up my trade. Bearish
market and February is the second worst month in the market historically. I am not looking for an exact number but I
would expect a drop to test 1710 and maybe a finish at or slightly above
1750ish. The “ish” means around give or
take an many numbers as I need to add or subtract to be close.
02-04-2014
1800 or higher –
1775
–
1750
– I
would expect 10 points plus or minus from this level
1710 –
1700 or lower
–
What is on tap for the
rest of the week?=
Earnings:
Tues:
PPZ, FSLR, M, HD, ODP, TOL
Wed:
ANF, BKS, CHK, DLTR, LOW NDLS,
NTRI, TGT, RIG, BIDU
Thur:
AIRM, BBY, CKS, KSS, MNST, ROST,
WEN, LINE, MEI, LNCO
Fri: DDD
Econ Reports
Tues: Case
SHiller, FNFA Housing Price Index, Consumer Confidence
Wed: MBA, New Home
Sales
Thur: Initial Claims,
Continuing Claims, Durable Goods, Durable ex-trans
Fri:
GDP 2nd estimate, GDP Deflator, Chicago PMI,
Michigan Sentiment, Pending Home Sales
Int’l:
Tues – DE:
GDP, FR: Business Climate
Wed – GB:
GDP
Thurs – EMU: M3 Money Supply,
EC Economic Sentiment
Friday – FR: Consumer
Mfgd Goods Concumption, EMU: HICP Flash, EMU: Unemployment Rate
Sunday –
How I am looking to
trade?
I am in a holding
pattern. Protecting the last of the
earning season stocks for their earnings.
Most of the stocks I trade or moving higher so I am shorting puts
against long puts. I’ve “chased” stocks
with short puts on NVDA, DIS, SNDK, TSLA,
BIDU
2/26
CLDX
2/27
LNCO
2/20
MEI 2/27
RIG 2/26
TSLA
2/19
Questions???
www.myhurleyinvestment.com =
Blogsite
www.KevinMHurley.com =
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www.customerservice@hurleyinvestments.com =
Email
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What Separates The Winning Traders From The Losers?
http://www.ino.com/blog/2014/02/what-separates-the-winning-traders-from-the-losers/#.Uw2e87RUnOo
Thank You – Here’s Your Analysis
Thank
you for your interest in this exclusive analysis and INO.com’s Daily Analysis
& Commentary. Please see the report below and don’t hesitate to contact us
at support@ino.com if you have any questions. You can also view this Traders
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INO.com – Exclusive Analysis
These 4 Things Are Key To Trading In 2014
http://www.ino.com/blog/2014/02/these-4-things-are-key-to-trading-in-2014/#.Uw2fh7RUnOo
Looking
back on 2013, I have to say it was a very good year, one that will long be
remembered by many investors and traders. Now the question is, what kind of
year is 2014 going to be? The goal of this special report is to make sure that
you are not caught on the wrong side of the market and have to give back all of
last year’s profits. By knowing these 4 important factors, you can survive and
thrive this year!
I am
going to be looking at the big picture and the S&P 500 index in this
report. The S&P 500, or the Standard & Poor’s 500, is a stock market
index based on the market capitalization of 500 large companies having common
stock listed on the NYSE or NASDAQ. By following the 500 largest companies, it
gives us a good sense of direction for the overall economic climate. The stock
market tends to look out 6 to 9 months ahead, so when the index is moving
higher, it’s thinking that things will continue to get better with the economy,
conversely when it’s going down, it’s just the opposite.
It’s
important to understand what drives and effects this index as it is an
indicator of general market health. In my opinion, there are 4 main factors you
must understand to trade in 2014: technicals, economic cycles, fundamentals and
perception.
1 – Market Technicals
Unlike
the fundamentals, the technicals pretty much rely on one thing, price action.
You want to be long when the prices are going up and out when prices are going
down. Technicians believe that the sum total of all knowledge (fundamentals,
perception and cycles) are all in a stock’s closing price for that particular
day. By measuring price against previous days, technicians believe they can
determine the trend of the market.
The one
standout technical feature I see on the S&P 500 chart is the long-term
trend line which comes in from the lows seen in 2009. There is also another
shorter trend line that begins in September of 2011. Should these lines be
breached on the downside, it would not augur well for the S&P 500.
Daily Close-Only S&P 500
Chart
Looking
at the daily close-only chart of the S&P 500, I can see the recovery from
the lows at 1,741.78 to the first major Fibonacci resistance level around
1,795. The next major Fibonacci resistance comes in at 1,807, which would be a
61.8% correction from the highs seen in January. The RSI indicator is back to
the mid-point line at 50, which should offer resistance for this index. The
combination of the Fibonacci resistance and the RSI resistance indicates that
the S&P 500 could be running into some serious supply lines.
Legend & Technical Picture
(Black Numbers)
1)
All-time closing high for the S&P 500 at 1,850.59 on January 15, 2014
2) Fibonacci retracement level.
3) RSI below its 50 line, which will now act as resistance
Weekly Close-Only S&P 500
Chart
Looking
at the weekly close-only chart of the S&P 500, I can see a “parallel
channel” starting back in 2009. The fact that the S&P 500 index is at
the top of this channel could present problems for further upside activity. I
have also drawn in the Fibonacci retracement levels. A 50% retracement from the
lows of 1,122 would drop this index back to a 1,481 support level. Further
downside pressure could push this index all the way back to the 1,400 support
level, which would represent a 61.8% Fibonacci retracement.
Legend & Technical Picture
(Black Numbers)
1)
Parallel channel for the S&P 500
2) Fibonacci retracement levels
Monthly Close-Only S&P 500
Chart
Looking
at the monthly close-only chart of the S&P 500, you can see the importance
of the trend lines that are support for this index. Should these lines of
support give way, it would indicate further downside pressure. One of the key
lines to look at, in my opinion, is the RSI indicator. A break below that trend
line could be the first inkling of problems for the index.
Legend & Technical Picture
(Black Numbers)
1.
Long-term support trend line
2. Intermediate-term support trend line
3. Next major time cycle of this index
4. Long-term RSI support trend line
2 – Market Cycles – 100 Years Of Capitalism
Let’s
look at over a century of capitalism and see the economic market cycles in a
capitalistic economy. Based on the graph, you can see the potential for this
market to have a pullback from the highs that were seen in January of 2014.he graph shown utilizes NASDAQ data. You may remember
that the NASDAQ topped out at 5,132.52 on March 10, 2000 with the dot-com
collapse. It has not made new highs since it peaked in 2000.
If the
economic cycles are correct and the same pattern continues and we assume that
the highs for the last economic cycle were in 2000, then we could see more
sideways action similar to the previous 17 and 18 year periods. Once we are
over that time frame, history suggests that it would be an excellent time for
long-term investors to load up and stay the course.
We are
now entering a period after a five year expansion in a longer-term secular bear
market, which means the chances of the S&P 500 delivering returns anywhere
close to 2013 are slim to none. Historically, it just has never happened after
a five year expansion, but when it comes to the market, you never say never.
3 – Market Fundamentals
The
fundamentals that power the S&P 500 index are important and can be as
simple as an investor looking for stocks that are going to improve over time or
as complex as a company’s balance sheets, profit margins, rate of growth and
dividend payouts. Another big factor that effects market valuations is the
policies of the Federal Reserve Board.
The
Fed’s decision to move into a quantitative easing stance in 2009 had an
enormous positive effect on the stock market, which has been the number one
beneficiary of this policy. “Helicopter Ben” has left office, but his
grand experiment lives on and it is up to the new Fed chairperson, Janet
Yellen, to clean up this mess.
The Fed
bet $4 trillion to push the S&P 500 from a low of 666.79 in 2009 to a high
of 1,850.59 on January 15, 2014. $4 trillion dollars is beyond a boatload of
money, that is how much debt we have piled on the books since 2009. With the
Fed now committed to tapering and gradually ending its quantitative easing
policy, it will be interesting to see if the markets themselves can stand
without the “Fed fix.” Many traders are concerned that the market has
become so addicted to the “Fed fix” and easy money policies, that the
markets may have a difficult time going cold turkey.
To make
matters more interesting, we have a looming debt ceiling problem that needs to
be resolved by the end of February. Not to resolve this issue means the United
States would run out of money which would start the market talking about a
potential sovereign debt default.
The
fundamentals that effect the markets can sometimes be overwhelming and complex,
but they are never boring.
4 – Market Perception
Perception
is a large unknown and extremely powerful in the marketplace. Perception can
and does change the direction of markets. Markets that were once loved by
investors, can be scorned a few weeks later, and this is particularly true with
momentum stocks. While perception is not as clear-cut as the technicals, it is
an important element and should not be overlooked.
Coming
into 2014 from one of the market’s best performances in history, the feeling
was totally different. Nothing much had changed technically or fundamentally
except perception in investors’ minds. Perception is a very fickle animal and
can change quickly like the weather.
Another
example of this phenomenon was the recent non-Farm payroll report that was
announced on February 7th. By all accounts it was a dismal fundamental number,
yet the S&P 500 was up 1.3% for the day. Once again, perception trumped the
fundamentals.
2014 And Beyond
As we
are barely into 2014, it’s turning out to be an interesting year to say the
least. Fundamentals, technicals, economic cycles and perception for the S&P
500 seem to suggest that 2014 will be a rough year. These four factors should
be evaluated and re-evaluted throughout the year to ensure you are on the right
side of the 2014 move.
I am
confident in saying that no matter which direction the market takes in 2014,
traders who are diligent and do their homework will do extremely well.
Best
wishes and happy trading,
Adam
Hewison
President, INO.com
Co-Creator, MarketClub
HI Financial Services Mid-Week 06-24-2014