TradeWinds Update

I have been a bit lax on posting, but as always I keep the charts and top 20 lists up to date should you want to follow them yourselves.

After two rollercoaster days, I would say we are in a net positive position, although we still have work to do to get to calm trading waters. Our slow momentum indicator held to the flat to slightly positive tilt during the market gyrations and the number of sectors in negative tradewaters has dropped from 30 to 25 over the past week.

I think what we are seeing is some big sector rotation going on as energy is being unwound as the leader and healthcare (XLV), biotech (BBH), techs (QQQQ, XLK) and even financials (XLF) are getting more attention. This is especially true in the small cap segment of the market (IWM, IYR). My thought is once this rotation is completed we will start seeing some steady upward movement in our momentum charts. Of course this can be disrupted at any moment by a big shock from geopolitical events, oil event, or some banking industry event, so don't get greedy as this scenario unfolds.

TradeWinds for July 21/22

I have been watching the week's rally with much interest to see if will get a firm foundation, and so far that seems to be the case.

Our momentum charts are all pointing in the long direction, but the all important slow momentum, while improving, is still in stormy waters, so the all clear cannot be signaled yet. All 30 out of 40 indexes/ETFs that we track are still in the stormy TradeWinds.

We have been saying that Healthcare (XLV), biotech (BBH) and Pharma (PPH) are the leading sectors for now. The latter has slipped a bit but the other two remain strong. There is improvement across the board with the exception of Oil/legacy energy. China is coming back strong, as are financial stocks. (Be wary of the financial area once the 30 day freeze on naked put selling expires.) Precious metals still confound me, so I am staying away from them.

In summary, market is showing some signs that its has bottomed and is now looking beyond the election and sees the end to the housing/credit crisis. But we all know that Miss Market just loves to play with our heads, so take nothing for granted. Let the momentum indicators tell you if this bounce turns into a trend or is just a correction within the crash.

Rally On.

TradeWinds for July 18th

We finished last week with all of our momentum indexes making nice moves to the long side, but keep you excitement under control.

Our long term or slow momentum index while clearly moving off a bottom is still very much in stormy TradeWinds, so we need to be cautious as this bounce/reversal plays out.  Clearly financials are roaring back to long life, but the question will remain if the rally holds.  Healthcare, pharma and biotech are the clear leaders right now as energy is starting to fade as oil corrects.

If you are a long player, be selective and vigilant to snatch profits until the Miss Market indicates that she is ready to switch partners and go with the Long Waltz.

TradeWinds for July 17th

Finally, the bounce we have been looking for. The next question to be answered will be whether the bounce turns into a trend breaker.

Our momentum charts have all turned up for the first time in a long while, but they are still sailing in very stormy TradeWinds. There are lots of hopeful signs out there for longs, but its hard to make trading decisions on hopeful signs. Be patient, if you choose to do a long trade, snatch your profits early.

As we suggested a couple of days ago, its now clear that oil has topped out for now and is in correction mode, so legacy energy is now a place to stay away from. That gives the sector leadership over to the biotech and healthcare sectors for now (XLV, PPH, BBH). Gold and Silver may be a place to make some money, but I am not sure. There are some resurgent sectors such as China (FXI), consumer staples (XLP) and transports (IYT), but they are still in negative TradeWinds. We would like to see them get into at least neutral waters before getting excited.

Today (Friday) should be an important day to test this bounce. Pre-market is showing some bad numbers because of some of the earnings reports from yesterday. If we are really into a counter trend move, we should see the market shake off these early blues. This doesn't mean an up day, just a strong move off the lows. Remember, its option expiration as well, so that can add to the unpredictability of the day's trading.

TradeWinds for July 15

I am getting more confident about two things. One, we have seen the top for oil. I mentioned some time ago that there has been a divergence between the oil (USO) momentum indicators meaning the price kept making new highs while the momentum indicators were not making new highs. This has actually been going one since about mid-April. I suspect this has gone on longer that it should because of the psychology of oil, but now I think the chickens have come home to roost and its time for a major correction.

Along with a top in oil, I am seeing more evidence of a bottom for the market in general. Certainly a top in oil would probably coincide with a market bottom, but also I think the financial sector has been way oversold and the tech sector is reasonably healthy (see yesterday's results from Intel).

Still nothing to get overly excited about except that the pain is going to ease up. On any given day, however, some geopolitical or economic bombshell could whack the markets, but I think we will start to see a stabilizing of the downward trend setting the stage for an upturn of some degree.

TradeWinds for July 14th

Well I am back from vacation and I see that the markets have not changed much in the last week. Oh sure, fear is rampant, but looking at our momentum indicators, particularly the slow momentum shows a flattening to slight up bias. Don't take that as a cause for any immediate optimism, we are still being buttressed by strong negative TradeWinds. It is starting to feel like we may be seeing the worst of the worst.

Today's pre-market is looking a bit iffy so there may be another wash out day by Miss Market before we can really call a bottom. Volume has been increasing during the recent sell-off which suggests that the pool of sellers may be ready to be exhausted.  Even if we do get a bottom, that does not mean that sunny days are ahead. We should see an oversold bounce at some time, but after that it could just be a flat market in tepid TradeWinds as opposed to a raging rally. Let the momentum charts tell you when we are back in positive TradeWinds.

In the meantime, if you want to trade long, you need to be looking at Biotechs (BBH), Pharm (PPH), Metals (GLD, SLV) and miners (SLW,GDX), and of course Oil (USO).

TradeWinds for July 3rd

Happy 4th of July Weekend to all. To celebrate we fired up the grill for our annual ribfest celebration. Those baby backs were extra yummy this year.

I am now heading on vacation for a week and will not be posting. Not much to say anyway. The market is still not a fun place for the long siders to be. As it was last week, the market is even more oversold. Maybe that means a rally soon, maybe just more pain. I gotta believe its the former, but who knows. So I will take a week off and maybe our indicators will begin to get some new life. I can guarantee you that it will happen some day, picking the right day is the key.

Happy Trading.

TradeWinds for July 1st

Is this a Bear Market Bounce? Or have the sellers become exhausted?

We won't know the answer to that question for awhile, but its fairly certain we will see a bounce here. I think the bounce will be meaningful in that it will be stronger than the other bounces we have had over the last several weeks as we have taken our waterfall ride into the Bear pool. I base this on some nascent trend reversal patterns in the 1 and 2 hour momentum charts. Forecasting from those can be a little tricky because when you think you are seeing clear weather coming you find that you were just in the eye of the hurricane. We will have to watch our daily momentum indicators to tell us if the bounce will turn into a real trend reversal or not.

There is only one non-commodity sector that is making a stealth bull move right now, and that is biotechs (BBH). Also showing improvement, but sill sailing in hostile TradeWinds is pharma, PPH, and healthcare, XLV (do you see the theme?). Take a look at that if you want to play the long side. Techs are stirring a tad, but nothing to get real excited about just yet.

Caution, bordering on fear, is the word of advice for the long players