It wasn’t a great session on Friday but considering how the week was playing out it definitely was welcomed by the bulls. Stocks rallied early on in what was shaping up to be a very impressive Friday rally. However, selling took over around noon and stocks trended lower into the final hour where finally a small bounce saved them from what would have been an ugly reversal. Volume was higher on the Nasdaq and Nasdaq 100 giving both indexes a technical pocket pivot point signal on their session. However, despite options expiration, volume was lower on the NYSE indicating a lack of across the board accumulation.
The bounce on Friday was to be expected as the crowd was getting a little pessimistic on the short term. The put/call ratio hit 1.20 on Thursday and the AAII survey came out showing only 19% of the respondents bullish. While this is not extreme it is bearish enough to warrant a bounce on the short-term. The problem still with the tape is that there are a lack of very high quality patterns and the few names that are setting up have some negative technical divergences with certain price momentum oscillators/indicators that I use. This could easily change in the short-term but as of right now there is a lot left to the imagination.
In reality, we are still in a big old trading range in between the 2015/2016 highs and lows. As long as we trade in this giant range with volume never really coming in on the upside and with the Fed ready to support stocks on the downside no matter what the odds suggest that this is the most likely path of least resistance with stocks in the short to intermediate term. The II survey shows bulls at 40% and bears at 22% which is in their mid-ranges of their 5-year highs and lows. Until I see some extreme sentiment there up or down and/or the AII survey comes off the 50% neutral level, it just makes sense that this market is probably going nowhere before it actually goes somewhere.
The best news from Friday is that quite a few high quality stocks caught my attention via their price and volume moves on Friday. The bad news is that all the patterns are higher risk (especially in this kind of tape) as they are either extended from their most recent break out levels or are still in the middle of a trading range. GIMO OFIX BLDR MPW WAGE were the best in terms of eye candy but the moving average setup on all of these names just are not right for a new long position in this current tape.
If any of these names, with their quasi-signals on Friday, would have had the proper moving average setup (price touching the 5, 10, and 20 DMA with the 5 DMA above the 10 DMA with the 10 DMA above the 20 DMA) you can be sure they would have been new longs. As it is, they all need more work. That is unless the market can rally 1% or greater on huge volume across the board. Then I’ll evaluate each new signal and see if it is OK to establish a “cheater” position. Until then, no way.
There were three long signals that did pass my moving average and overall fundamental/technical setup test and they will be new long positions but they will remain very small relative to a normal long position in a strong uptrending tape. Those names are available under the New Positions tab available to subscribers and those taking a free trial.
I am back at home in Maui and in front of my monitors. It’s nice to be home but me and my girlfriend are moving to a larger condo unit in our building so it is possible there might be a few more days of hiccups during the next couple of weeks on my end in the postings. I don’t foresee this being an issue at all but I wanted to give everyone a heads up just in case the updates are not up at their usual time around 8pm-9pm EST. It’s good to be back home! Have a great rest of your weekend and I wish you the best during the upcoming trading week. Aloha.
TOP CURRENT HOLDINGS – PERCENT GAIN SINCE SIGNAL DATE – DATE OF SIGNAL
CLR long – +118% – 2/11/16
GRAM long – +57% – 4/1/16
APLP long – +30% – 3/31/16
