We have entered the land of great looking swing technical setups against the backdrop of shaky economic data and generally good earnings reports. What do we do? There are numerous charts that are very attractive – simple triangles, resistance busters, etc., but economic data reports continue to show that we’re in a slow motion recovery cycle. At the same time, earnings have been strong with somewhat optimistic outlooks.
Then there is the consumer.
There are two numbers I look at when I think about the consumer – Consumer Confidence Index and Employment. If you just look at those, you’ll have a snapshot of the mood of the American consumer and their willingness/ability to spend. Both numbers suck – period. OK… maybe not suck, just not showing improvement.
Look at this confidence chart.. it is a few weeks old, but you get the idea. With this number headed in the wrong direction, I can’t be too eager to heavily positioning myself in long swing positions. This chart is just not bullish.
Then there is employment data – it looks like we’re locked into +9% unemployment for some time. This means a lot of government spending and less investment in people by corporate America. If we could see some significant non-government related hiring, we could see a sustained bull run. Until then, I still think we’ll remain in a choppy market benefiting short-term traders.
Quick look at the SPX:
- We’ve held above the descending trendline
- MACD still bullish
- RSI14 still bullish
The warning signs:
- Move not supported by big volume. This may not be a huge issue, but worth watching. Market is still a little hesitant to go all in
- We failed to move through horizontal resistance on Friday. Notice the highlighted yellow area. This range has become the market-neutral range with bulls and bears fighting it out for supremacy.
- Hard to be bullish under SMA200
My approach is still simple. I’ll spend most of my time scalping throughout the day while also picking up a few swings here and there. I do not want to hold stocks into their earnings reports and anything I swing needs to have a lot of technical support with minimal volatility relative to scalps.
A few points to consider for Monday:
New Home Sales data released. As you know, homebuilders have been in a downward spiral since May. These are the kinds of opportunities we look for to book short-term gains based off news in a beaten down sector. If you take a look at the charts from top traded builders, you can tell that last week represented a turn back to the upside with a few resistance levels being taken out. It appears that a few investors felt swinging into Monday’s report. There is a ton of upside in these stocks IF news supports. Here are a few stocks to watch if the New Home Sales numbers look good:
PHM – possible swing on a move through 8.72. As with all homebuilder stocks, I am not interested in holding a swing under SMA20.
HOV long above 4.40 with tight stop.
The home builders generally move together, so don’t spend a lot of time finding the right one.. if the segment is moving, pick a liquid stock and ride sector momentum. This group is dangerous, however, so watch for earnings and set stops.
Other quick thoughts:
- Back to school is about to kick into high gear – let’s watch the retailers.
- Many solar stocks appear to be overbought – I’m considering an FSLR or TSL short. If solars continue up, I like the STP and ESLR charts (I’m currently long ESLR).
- Lots of banks reporting on Monday. We’ll need to keep an eye on those highly volatile sub-$10 regional banks for possible plays.