Thursday, February 27, 2014

S&P 500 Still Overbought At Maginot Line

The stock market is still very overbought while holding up so far at the top of the trading range as represented by the S&P 500.  My question is twofold: Will the market gently correct or rotate into different groups as some groups get extended and others come into vogue. Or will the market sell off here. I am still playing small and fast.

Some Current Market Themes

1- In each of the last few days the market has sold off sharply in the last hour to hour and one half of the trading session. This is never a good sign as day traders grab their profits early and the so called smart money sell at the end of the day. In a strong market neither group of players would be able to get away with it.

2 - The New "Nifty Fifty" Of Mostly NASDAQ 100 Stocks. In the 1960s it was the "Nifty Fifty" group of leaders led by XRX, IBM, PRD, and so on. I don't know what the number is today, but a small group of stocks like CRM,  GOOG, NFLX, PCLN, and TSLA are leading the pack.
Value never matters during these phases and its always concentrated in a small elite group.

As one can see, the NASDAQ 100 is the only major index at new highs, but the pattern is becoming more erratic. While there never are guarantees in TA land, the megaphone pattern on the $NDX chart is indicative of a skittish market. Usually these types of patterns lead to more meandering.

Some Example:

GOOG is a great company that just goes up every day. I'd like to own it, but I won't chase it in its extended state.

TSLA is the poster boy for the entire speculative market. Everyone knows the story. It has much to prove and may be having a huge financing soon to pay for its new lithium ion factory.

3 - What Me Worry? Whether it is the S&P Oscillator, the $VIX, or McClellan Oscillators, this market is short term overbought. Will the market sell off again or have some group rotation to work off the overbought condition? Whatever one does, it would be smart to avoid extended stocks like TSLA.

$VIX is very low. It is saying that no one fears this market. A contrarian would say to sell the market here.

4 - Mixed bag of economic statistics, mostly showing weakness. 90% of the economic numbers are weak. For every strong HD, there are 10 weak retailers. For every strong housing start number, there are several housing numbers showing weakness. The Fed is acting on bluster as if they know for sure that things are improving. How many times have we heard that before? The problem is that we just don't know yet.

Some Stocks I own or have Traded

CSIQ is a great stock. The crème de la crème of the solar stocks. It is breaking out right now, having popped a base and pierced it's all time high before falling back as the market sold off after 2:30PM

MONIF Is encountering some resistance here near its all time highs. I liked the way the volume fell off yesterday. I did not like the way it tried to pop today on higher volume, only to fall back into the end of the day market sell off. I'm trying to hold on for the short term, wary of the resistance at $1.39. Long term, I don't think one has to worry about a thing. 

EOG I sold EOG too soon as it has rallied all the way back to its all time highs. A great company.

PXD I am holding onto PXD but am concerned that it has not followed in lockstep with EOG as it has done in the past. The Elliot wave guys are predicting a huge price increase. I still think that they have had a few short term logistical problems, but have the largest amount of oil in the USA which will boost the name to new highs. In my opinion, they have a good chance of eventually becoming a major oil and gas company.

WTIC The price of oil has been going up and that has helped the shale plays like EOG and PXD.

PXD/EOG Overlay: Just to illustrate, one can see that EOG and PXD have traded as twins until 2014. Wake up PXD!

SCTY broke out of a small base two days ago. I bought it on the breakout yesterday and sold it into the whoosh up today for a near 10 or so point gain. I think it will go higher, but I had bought CSIQ and did not want to be overloaded in one group. I may day trade SCTY.


BIG Capital Advisors and Seaview Partners are not responsible for your investment decisions. We believe very strongly in our opinions, but you must perform your own due diligence in making your investment decisions.
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