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.