Trade Anatomy Portfolio
+.78% MTD | +.46% YTD
2 long | 0 buys | 0 sells
With a solid two weeks on the books, the markets are creating plenty of chatter among technicians and traders in regards to resistance lines and retracements patterns. You've probably seen a few charts comparing the current market to another past time frame. Somehow by overlaying the 2016 market on a past market cycle, you will be able to know how severe a correction will be or when the trend will change. All market cycles develop over varying time frames and can rarely be overlaid with one another to predict a top or a bottom. So, what to do? Study past markets, but don't use them to predict the next move. Instead study them to understand how market tops and bottoms form. Take the current environment in conjunction with your setups. Is your current trade setup list rising or falling? How robust is your list relative to past market corrections? When the answers to these questions align with past situations, you have a better understanding of what to do.
The longer term chart of the S&P 500 remains negative which can create a trading environment with headwinds for any trades taken.
TZA & TLT
Two charts that I look at for short term reversals in my trading environment are TZA & TLT. Both tend to make quick moves to the upside when markets move down. The TZA main trend line rarely moves up due to the investments inability to track accurately. So, when it does move upward, it's important to take note. Generally when the trend line starts moving down, then the overall trading landscape is more productive for long positions. Likewise when TLT is moving down, our trading opportunities tend to have a higher rate of success. Here again, this is simply used to frame the potential for opportunity, but it needs to be accompanied with individual setups . As you can see from the charts below, the alert indicator marked recent tops in both TZA and TLT, but neither have violated their main trend lines.
Stock Price Action
Another way to get a feel for the market and whether it's providing any opportunity is to watch how stocks respond to earnings. When markets are healthy an earnings' report will act as an upside catalyst and push stocks to new highs. Currently, the majority of stocks are already in negative trends with earnings simply accelerating the process. A few examples are RH, LNKD, and LXFT.
This week, I've included the daily chart for viewing. Last week, I discussed possible range levels for GLD and also included several individuals names to watch. It appears, GLD is still fighting to move into the second tier, but it could spend a bit more time between 117-112. Trailing stops could be placed around 112 or 110.
Trade and Position Summary
No new trades were taken this week and both long positions were maintained. Very little changed from the previous week as possible new positions continue to be evaluated.
The main screen has risen to approximately 91 names since last week, but as mentioned in the previous post , many names still need more time to set up constructive charts for possible portfolio consideration. On Friday, I mentioned MXL as a possible trading candidate. It moved above 16 on the open but wasn't able to maintain that level by the close. This type of price action is very typical when the overall trading environment is acting as a headwind. Below are a few from the watchlist that are being monitored.