HI Financial Services Commentary 04-06-2016
Don’t let fear of failure discourage you. Don’t let the voice of critics paralyze you – whether that voice comes from the outside or the inside. – Deter F. Uchtdorf
I’m going to go over that quote – I’m shocked at what people have done year to date
#1 Selling out in February for more than a ytd 10% loss and #2 still haven’t put 10% of their portfolio back into market
#3 Lost 50% of their 7 figure portfolio spread trading without ever adjusting I SAY OVER AND OVER trading is a process.
DON’T just place a trade and wait to see if it works – THAT’S STUPID !!!!!!!!!!!!!!
#4 Lost hope in the process and went to asset allocation funds
I’m shocked we are back to break even on the markets !!!!!
I Think that we are still the best house in a really, really ugly global neighborhood.
NOW: Our view of SPX turns NEUTRAL today, despite only one close below the 5DMA. We’re taking this step because:
- The 10DMA is now falling after 33 days of ascent
- MACD is falling. The hourly chart also has bearish divergence on at the 4/4 peak.
- The April 1 rally was probably a false bullish signal because it resulted from the start of Q2.
- The index is near resistance at the late-Dec high around 2081
- Earnings season starts in 2-3 weeks with financials, many of which have already warned of poor results.
- Junk bonds and energy in general are also looking weak. HYG and XLE have both made lower highs since mid-March. These have been canaries in the coal mine that have led the SPX.
- The collapse of the PFE-AGN deal adds to political risk in the healthcare space and mergers in general. Political risk hasn’t been a significant ingredient in this market for years but it could increase as elections approach.
- Support is at 2034 on /ES or $203.90 on SPY.
- Next support is a zone between 2012 and 2020 on /ES, the lows of 3/24 and 3/29. This matches $201.65 to $202.50 on SPY. If SPX begins a skid lower we would expect the lower end of this zone to be tested and not rush buying the top.
- Below this, SPX likely has support somewhere around 2000 because this level has served as a pivot at various times since August 2014.
- First resistance is the same as yesterday, around 2049.50 on /ES or $205.40 on SPY. This kept the index in check overnight.
- There is potential resistance at 2060 or $206.40 on SPY, the intraday breakdown level on 4/4.
- The highest resistance is around 2071.50 on /ES or $207.60 on SPY. This roughly matches the highs of 4/1 and 4/4.
GAME PLAN: We won’t have a game plan because we are NEUTRAL. However, there may be follow-through to the upside if SPY breaks $205.40 and downside on a move below$203.90.
5-day chart w/15min candles
ECODATA & CALENDAR:
Crude-oil inventories are due at 10:30 a.m ET. Last night’s API report was strong at -4.3mln vs +2.9mln est.
The biggest item is FOMC minutes at 2 p.m. ET, although voting member Loretta Mester also speaks at 12:20 p.m. (She was hawkish on 4/1).
- Thursday: Retailer comp sales, jobless claims, natgas inventories. Key earnings: CAG KMX RAD | RT
WHAT WILL CHANGE OUR OUTLOOK:
- We will go BULLISH if SPX closes above the 4/4 close of 2073.
- We will go BEARISH if the 20DMA on SPX turns negative.
LONG TERM VIEW: Our longer-term view is NEUTRAL, with the potential for new highs or new lows depending on the economy.
- SPX is in a range between 1812 and 2130. The Feb 2014 low around 1730-1740 is the next likely support if it breaks.
- Long-term momentum is neutral, with SPX range bound and moving averages convoluted.
- We see strength in the economy — especially after the March regional Fed indexes and ISM beat estimates. Nonetheless, there remains a widespread belief to the contrary.
- We also see the likelihood of earnings to improve as the USD weakens and inflation rises. We believe this is not yet priced in an could serve as a positive catalyst as we work through earnings season.
- SPX probably needs to retest at least 2000 and possibly 1950. It is also due for a pullback to its 50DMA.
What’s happening this week and why?
Fed minutes said “global concerns” justify waiting to raise rates
Factory Orders -1.7 vs est -1.7
Trade Balance 47.1 vs est 46.2
ISM Services 54.5 vs est 54.0
Where will our market end this week?
Continue higher but not a lot higher
DJIA – Double bottom, bullish and now bouncing off over bought on the RSI
SPX – Ditto the DJIA
COMP – Bullish but defending the 200 SMA and still has room to run
Where Will the SPX end April 2016?
What is on tap for the rest of the week?=
Tues: CREE, DRI, WBA
Wed: APOL, STZ, BBBY, MON, QIHU
Thur: KMK, CAG, RT, PSMT
Tues: Trade Balance, ISM Services
Wed: MBA, Crude, FOMC Minutes
Thur: Initial, Continuing Claims, Consumer Credit
Fri: Wholesale Inventories
Tues – FR:DE:EMU: PMI Composite
Wed – DE: Industrial Production
Thursday – EMU: ECB Minutes
Sunday – JP: Machine Orders, CN: PPI, CPI
How I am looking to trade?
AAPL set for earnings and I will let half the shares get called away
BABA can also get called away for all I care
BIDU June 200 calls that were put on when it was closer to $155 a share
DIS – Protective put for earnings out to June
F – Protective Put for earnings out to June
FB – Already set for earnings
V – I will collar out to June long puts at $77.50 and roll the short calls to the Jan 17 85 strike
Just for fun I places a Sept 20/28 VIX Bull call for $1.70 and I placed it when the VIX was at 13.44
www.myhurleyinvestment.com = Blogsite
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