Market Commentary
Index futures rallied into last week’s highs overnight
and rolled over in a vertical decline, selling off to
March and April support levels, ahead of a strong
afternoon bounce that brought the S&P 500 back into the
green. Big tech underperformed, stalling at the flatline,
while the Russell 2000 split the difference, dropping to
a seven-week low and bouncing strongly in a long-legged
doji candlestick reversal.
Defensives caught fire early, lifting the DJ Utility
Average into steep resistance near 580, where the 50- and
200-day EMAs have converged with the June high and range
breakdown level. It will be tough for the index to clear
the 580 to 600 zone without additional consolidation, but
relative strength is significant, pointing to a flight to
safety that may dominate the third-quarter tape.
iShares 20-Year Treasury Bond ETF (TLT) gapped up
to a six-week high and into a test of the declining 50-
and 200-day EMAs at $120 and $122.30. It will take a
rally above $123.50 to end the string of lower highs in
place since March and start a new uptrend. As noted in
recent weeks, the fund has reached major support, but it
will take time for buying pressure to escalate, unless
the bottom drops out of equities, which remains unlikely.
KBW Banking Index (BKX) sold off and failed to recover a
notable breakdown at the 50-day EMA. However, it’s also
reached support created by the rising highs trendline
going back to March 2014. Conflicted technicals suggest
neutral ground where positions on both sides should be
managed quietly until one side takes control. Bulls need
a rally above $77.50 to make that happen while bears need
a selloff through $75.
China and Greece remain volatile wild cards this evening.
There’s a good chance Greece will finally recede to the
sidelines, but China is another matter, after a fifth-
wave climax, followed by a steep decline and government
intervention that has, so far at least, failed to end the
rout. Honestly, I’m not sure restrictive societies
understand that the market’s greed/fear mechanism has
greater power than central planning. Guess we’ll find
out.
I sat on my hands again and am still flat in the trading
account. I looked back at my records and discovered I
haven’t taken a trade since June 25. This might upset a
few adrenaline junkies in the congregation, but it’s also
the reason my subscribers have remained so intensely
loyal over the years. After all, we’re doing this to make
money, not set off pleasant brain chemicals.
Random Notes on the Market
— FOMC minutes at 2 p.m. ET will move Wednesday’s
market.
— Second-quarter earnings season starts at Wednesday’s
close, with Alcoa (AA) earnings.
— Copper fell to a six-year low.
— VIX failed to rally above last week’s high in a
bullish divergence and closed in the red.
— DJ Transportation Average hit another multimonth low,
but closed firmly in the green, suggesting that it’s
oversold and ready to test higher levels.
— PHLX Semiconductor Index (SOX) hit a five-month low
and bounced into the close.
— Gold is testing the 2015 low.
— CBOE will begin listing $VIX weekly futures.
— Energy funds hit multimonth lows and bounced into the
close.
— Speculative cash is exiting the health carriers at a
rapid pace.
— Retail stocks look like they’re bottomed out.
Today’s Spotlight No. 1
Canadian Solar (CSIQ) topped out at $52 in 2008 and
sold off in two waves to an all-time low at $1.95 in
November 2012. It then entered a new uptrend that stalled
within eight points of the 2008 high in February 2014.
Price action in the last 17 months shows a broad
channeled decline with a series of lower highs and lower
lows. It’s currently trading near the midpoint of this
flag pattern.
The 2014 reversal started at the 78.6% bear-market
retracement and could signal the end of the uptrend, but
we won’t know until the big consolidation pattern gives
way to a new trend impulse. OBV has taken a major hit in
the last year and is back to the low posted when price
printed the lowest low in the range pattern. This lagging
behavior suggests active distribution that favors an
eventual breakdown into single digits.
Today’s Spotlight No. 2
Tesla Motors (TSLA) topped out at $265 in February
2014 and entered a trading range that’s still in force 17
months later. A marginally higher high in September
failed to trigger a sustained breakout while support in
the $170s has held through two tests. The stock returned
to the early 2014 high in June and rallied into the
unfilled September gap between $275 and $279 last week.
It gapped down in today’s session, posting higher than
average volume.
The stock bounced on the early 2014 high and is now
caught between those levels. Continued downside will lay
the groundwork for a third range high that could yield a
significant retracement into the fourth quarter. OBV
hasn’t cooperated with shareholders this year, showing a
major bearish divergence because it’s flatlined well
below prior levels even though price has ticked up to a
nine-month high.
Spotlight presents updated index analysis, quick takes
on reader favorites and fresh views of active picks. The
section belongs to our subscribers, so let Alan know what
charts you would like to see by sending him your
requests. Please note that Alan can’t answer all of your
requests due to time and space restrictions.
Watch List Update
— The Hanover Insurance Group (THG) pulled back
in an inside day. (long – 6/16/15)
— Merit Medical Systems (MMSI) bounced along
the 20-day SMA. (long – 6/16/15)
— Anacor Pharmaceuticals (ANAC) consolidated at
the rally high. (long – 6/12/15)
— Wisdomtree Investments (WETF) returned to the
failed breakout level for a second try. See my notes.
(long – 6/10/15)
— Manhattan Associates (MANH) sold off and
bounced into the close, posting a long-legged doji
reversal. (long – 6/4/15)
— Amazon (AMZN) sold off and bounced into the
close, posting a long-legged hammer reversal. (long –
6/1/15)
— Facebook (FB) tested range support and bounced
strongly. (long – 5/28/15)
— EPAM Systems (EPAM) consolidated at the
breakout level. (long – 5/27/15)
— Tetraphase Pharmaceuticals (TTPH) consolidated
at the rally high. (long – 5/19/15)
— Penn National Gaming (PENN) consolidated at the
rally high. (long – 5/18/15)
— Nike (NKE) rallied to a new high. (long –
5/14/15)
— Goldman Sachs (GS) printed a long-legged hammer
reversal at 50-day EMA support. (long – 5/13/15)
— Papa John’s (PZZA) posted a bearish outside day
at the rally high. (long – 5/7/15)
— Teleflex (TFX) sold off within a rising
channel. (long – 3/18/15)
— Skyworks Solutions (SWKS) broke range support
but bounced strongly and closed back above support. (long
– 2/18/15)
— Palo Alto Networks (PANW) tagged a four-week
low and is testing the 50-day EMA. (long – 1/26/15)
— ABM Industries (ABM) broke range support and
will be removed.
Watch List Ticker
Many watch list stocks are set up for higher prices, but
overnight risk remains exceptionally high. I’m not
willing to carry that risk, but your mileage may vary …
I’d like to jump on THG closer to $76 … WETF June 29 gap
marks significant resistance … MANH flush could now set
up a breakout into the low $60s … FB range pattern still
looks incomplete … PANW behaved poorly compared to other
high fliers during the afternoon bounce.
Today’s Short Candidate
iShares Silver Trust (SLV) rallied from $8.45 in 2008
to $48 in 2011 and entered a steep downtrend that’s still
in force more than four years later. It penetrated the
78.6% rally retracement last September and entered a
sideways pattern that broke to the downside on heavy
volume in today’s session. This confirms harmonic
resistance near $17 and favors a decline that completes a
100% retracement to the low posted seven years ago.
…
Click to view a price quote on SLV.
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