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Subtleties in S&P 500 breadth

There are two subtle signs in S&P 500 breadth worth noting as we grind further into August.

First is the lack of new highs in the ratio of the S&P 500 equal weight index vs the S&P 500.  The ratio hasn’t made new highs since May.  In fact, this ratio has failed to take out 2015 or even 2014 highs.

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While that is notable and troubling, the trend of the 100 day MA has been what matters as a tell of market direction.  For now, that is trending higher.  This could become problematic in time.

 

Second is the lack of new highs in the S&P 500 advance-decline line as the Market made new highs last week.  This is the same signal that came at the market bottom in February, just on a shorter timeframe.

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So what does all of this tell us?  First facts, then theory

Facts:   Although participation has been strong, larger stocks are pulling more weight.  This is something to keep an eye on until it resolves.     

Theory:   Perhaps smaller stocks are getting pulled along by ETFs.  Also megacap stocks with attractive dividend yields such as AT&T and Johnson and Johnson have seen amazing rallies this year.  

Conclusion:  We see two chinks in S&P 500 breadth armor.  These charts aren’t foretelling doom, but they are worth watching until they resolve.  It’s possible they could become bigger issues in time.

 

Trade ’em well!

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Tesla part duex

I wrote on Tesla over at See It Market when the Solar City deal was first floated around.  What stuck out was the amazing negative sentiment around the company as it approached major support.

6 weeks later and the amazing negative sentiment in Tesla continues.  It’s just hated in the investment community.  The #1 related tag on stocktwits is #Fraud.

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That sentiment is just ridiculous.

Tesla bears should keep in mind a couple of things:

  • Green energy, just like any other technology, will become more economic over time thus making Tesla’s model much more viable.
  • There is a lack of yield around the globe.  Every shit company with a hint of a future has been able to restructure debt time and again.

We could make points and counter points all day so let’s take a look at the chart.

The daily chart shows the strong demand for shares under 200.  Since the 140-270 rally ended, shares have formed and popped out of a falling channel/wedge.  This structure is bullish, but resistance looms at the 235-240 area.

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Let’s zoom out to the long term weekly chart.

We see a potential rounding top forming over the last two years.  This reinforces the resistance level around 240 or so.  What makes this pattern incredibly difficult for shorts is the fact that the major support around 180 has been breached, re-tested and very aggressive buyers have shown up.

The 180 area is also supported by the rising 200 week moving average.

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To summarize:

  • Shares are stuck right now and the upcoming compression break is going to be massive.
  • The combination of aggressive negative sentiment and the underlying technical structure leads me to think the eventual break comes higher.
  • If shares breaks over the recent high of ~270, the stock can explode much higher.

 

Thanks for reading!

(Full Disclosure: I’m long Tesla shares)

Augmented Reality Go!

The Following is a post from last year at my old site

The topic is something Hasbro coined Playmation.  Playmation is simply augmented reality toys and experiences.  

Pokemon Go is the first glimpse of a viral augmented reality game and it is glorious.  That’s why all the video game makers are seeing explosive upside moves.  This niche of augmented reality experiences that keep you active is an explosive area of opportunity.  

I wanted to share this post again, because this is the direction we’re headed and there are MASSIVE profits to be made.  Without further adieu…

Earlier this month Disney and Hasbro announced this new Playmation toy initiative.

This seems like it’ll be a big hit with millennial parents; who want their kids to be active and use their imagination.

The question for the near term is of course, will the kids like it?

The question worth asking for the long term might be:  How does the bridge into virtual reality?  How does V/R become part of the playmation experience?  Which got me thinking…
Is the biggest misconception of virtual reality detractors the idea that oh we’ll just slap a headset on and sit there?
It seems until Virtual Reality headsets can plug into our brains, V/R would be a much more immersive experience if it were an activity.  How do we reach that point?  Who knows, but there is a TON of investment opportunity here in the whole complimentary system around virtual and augmented reality.

Check out this cool contraption Hyve made to compliment V/R and physically exhaust us.

Thanks for reading!

The Financials conundrum

If the S&P 500 does break to new highs in the coming weeks, it will undoubtedly come without the support of financials.

This puts a popular market maxim to the test.  Some say that the market needs banks to participate for a sustainable rally to develop.  The basic line of thinking is a healthy economy has a healthy banking system etc

Well, 2016 is an extreme environment and banks have lagged and dragged for years.  It hasn’t mattered.

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Banking is an industry facing secular headwinds.  The major headwind (collapsing yields) coincidentally is helping keep market breadth strong.  That nullifies any lack of participation by the banks as a market wide measure takes precedence over a specific sector.

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This is not to say we wouldn’t prefer to see banks trading well.  This isn’t saying a move to new highs would be long term healthy and sustainable.  We’ve just got to play the hand we’ve been dealt and the cards suggest a break higher.

Trade ’em well!

Silver Update

Back in March I noted the massive Silver breakout setup.  It was a beauty.  We’re finally reaching a major price target, the 200 week moving average.

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Sunday night, Silver futures hit 21 before sharply reversing to 20.  This is right where we’d expect heavy selling.  As a position sized swing trader, this is where I get off.  That doesn’t mean this is a long term top.  It’s just a solid area to lock in gains.

Longer term holders should be pretty content and pleased as Silver has just broken it’s downtrend from 2011.

All things considered, the base case is Silver consolidates in this new range of 18-21 in the coming weeks.

Keep your eye out for any push back closer towards the 10 week moving average, this is still one of the most attractive assets in the market.

Trade ’em well.

 

 

ajrd

Turning a Top Trading Link into a Trade Idea

I just mentioned in the last post my linkfest Top Trading Links.  You’re probably wondering how to derive value from some of these reads.  Here is a prime example of what I’m trying to do.

Last week the FAA announced the first commercial drone regulations.  We’ve been waiting on them for 8 months.  Finally we get them.  The whole idea is, with that news, take a look at the charts of the major drone related stocks and see if there are any opportunities.

The news brought certainty to the drone market.  This has lead to some interesting setups this week.

Flight Propulsion systems maker Aerojet Rocketdyne has based above support and it’s 200 week moving average for the better part of a year now.

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Leading commercial Drone maker Lockheed Martin consolidated tightly for a month plus while the 50 day moving average has caught up to price.

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These are just two examples, but there are many more names presenting opportunity in the space.

If you have any questions as to why I shared a certain article, don’t hesitate to ask.

Trade ’em well!

Top Trading Links

Every week I post a linkfest on See It Market called Top Trading Links.  They are reads about key developments in markets, improving your trading and news items affecting stocks.

Here’s a look at last week’s version.

Market and Trading Insights

A must see earnings statisticPaban Raj Pandey

The Trade Risk Market RecapEvan Medeiros

Is a 2007 pattern repeating in the NYSEChris Kimble

Also from Chris Kimble: The German DAX is testing major support

Nervy Global Investors dust off 1930’s playbookMike Dolan

Cyber Security M&A is picking upJoe Kunkle

5 things you should know in the aftermath of BrexitFrank Zorrilla

U.S. railroad carloads are below the 2009 lowsEric Bush

 

News and Other Research

Meet Today’s American ConsumerMcKinsey

How much does the president really matter?Freakonomics

The FAA announced the first set of U.S. commercial drone regulationsInsurance Journal

How to make sense of the Brexit turmoilFive Thirty Eight

DARPA’s new digital eye lets soldiers see around objects – Engadget

Amazon Echo really matters – Anil Dash

Facebook Live now allows two person broadcasts – TechCrunch

 

Trade ’em well!