The markets were range-bound last week, as stocks consolidated. After Labor Day Monday, Markets opened with a rally on Tuesday. But, as discussed in my Market Forecast last weekend, stocks hit resistance between 1970-1980. After a quick overshoot on Wednesday, buyers locked in profits. Thursday and Friday were tightly ranged.
We have been keeping mostly cash, but, still found some nice trades. AVGO calls gave us profits as high as +72%. On the stock side, we locked in profits on SEDG for a gain of +7.9%. Here are the closed trades for the week.
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For the week, the Dow was up +330.71 points; SPX added +39.83 points; Nasdaq gained +138.42 points. Gold fell to below $1110/ounce. Oil (WTI) slipped below $45/barrel. Over the weekend, China reported a slow-down in its factory output. At the time of this writing, it seemed enough to place pressure on Asian stocks, which were mostly lower. Still China is aiming for a 7% GDP growth for 2015, although it seems that economists outside of China does not believe in that number.
Whether online or on TV, everyday you hear people arguing over Fed's up-coming decision on interest rates. Then, they worry about China's economy and whether or not China's GDP numbers are real. Finally, they try to rationalize what happens on the stock market each day, coming up with a "reason" for which ever way the market goes. I think these are just "noises", either people trying to make themselves useful by coming up with mental explanations for what is happening to feed the media, or people trying to "mislead" others by creating a false picture to make the scene even more confusing.
If you have not realized this, you should at least try to consider it: the stock market is a game! There are many facets to the game, and, we play the ones that we can. Most of the big trades on the markets are now being done by computer algorithms. Only the price actions will tell the truth. There does not necessarily always need to be logical reasons, especially when the markets are range-bound. Certainly, the computers do not understand "reasons". All they know is what are mathematically "possible", and, they often act along those possibilities, or rather "plausibilities". Soon enough, actually on Wednesday, we will know whether the Fed raises rates or not. There is really no need to stress ourselves out over the Fed, or trying to read all the arguments over whether the Fed should or should not raise rates. It is not the game that we need to play. At least, it is not for me.
So, having said all that, let's see where the US markets stood after Friday's close:
On Friday, SPX added +8.76 points to close at 1961.05. It closed above its 10-day MA. The MACD went up.
Nasdaq gained +26.09 points to close at 4822.34. It closed above its 20-day MA. Its MACD also went up.
Techs out-performed the broader market, as Nasdaq climbed above its 20-day MA. SPX felt the pressure from the energy stocks on Friday, but, still managed to close higher. For the new week, the market will start out with a neutral stance, albeit leaning a bit more towards bullish. I think there is a chance that SPX will re-test 1980, or perhaps even 2000. But, it would need to do far more than those to undo the damages done by the plummet in late August. So, there is still downside risk to test 1900.
Let's see how the major sectors look:
FAS was fighting hard with its 10-day MA last week. It would be good to see it above the 10-day MA. Then, it would be a little easier to call the market, and, at the very least, it would provide the broader market some needed support.
Energy sector is still very weak. But, perhaps it is starting to draw a support. You can see that its MACD has made a bullish turnover. EOG is among the strongest. OXY and APC are among the weakest.
IGV is challenging its 20-day MA, and the MACD has turned up. ADBE reports on Thursday after market.
FDN closed just above its 20-day MA and it's among the strongest sector. GOOG seems neutral. AMZN, PCLN, and FB have been strong. LNKD saw a solid bounce last week. TWTR could see a pop here.
BTK is testing its 30-day MA. BIIB looks to be setting up for a pop. AMGN is still weak. GILD and CELG have been among the stronger ones. INCY and CLVS broke out last week. KITE may be interesting. HRTX pulled back from the recent high of $42, and, could be interesting to watch as well.
Good night and HappyTrading! ™