July 4th Week Stock Market Analysis
Welcome to Stephen Loke's July 4th Week Stock Market Analysis. This analysis is written mostly for my own benefit to clear my thoughts and because I find it helpful to write things down. I tend to analyze more and better when I write stuff down. If you happen to read this page, hope it helps you too.
One of the problems with writing stock market analysis is that readers expect you to hit price projections or have calls that are spot on. That does not happen because the markets are an evolving thing and the wise trader or investor should be flexible and change his opinions fast enough to prevent big drawdowns to his account or to spot trading opportunities. (As usual, the latest analysis are on top while the older ones are at the bottom.) For the 3rd Week Analysis click on the link.
One of the problems with writing stock market analysis is that readers expect you to hit price projections or have calls that are spot on. That does not happen because the markets are an evolving thing and the wise trader or investor should be flexible and change his opinions fast enough to prevent big drawdowns to his account or to spot trading opportunities. (As usual, the latest analysis are on top while the older ones are at the bottom.) For the 3rd Week Analysis click on the link.
July 4th Week Stock Market Wrap Up
Wow, we really had a great month in July. Stock market recovered from the massive drop after the BREXIT vote and immediately reversed the drop and not only that, it made a new high. I will be writing a piece on why the stock market reversed so drastically from the point of technical analysis in the future so stay put and watch out for that piece.
Meanwhile, here is a summary of what to expect for the month of August
Meanwhile, here is a summary of what to expect for the month of August
- Most major indexes with the exception of DIA are trading sideways in the 60 min charts, so expect a breakout or a breakdown. It won't always trade sideways, so one or the other is bound to happen.
- August is usually not a very profitable month for the stock market as a whole. Therefore, it pays to be cautious. You can check it out using the stockcharts.com seasonality charts. I wrote a piece on How To Increase Your Trading And Investing Success Rate Using Stockcharts.com Seasonality Charts. Click on the link to read it.
- Even if there is a drop, I would deem it a correction and there is ample daily support on the charts which will hopefully halt the drop and give us buying the dips opportunities.
For your information, I have initiated a long position on IWM for the breakout trade. I'm not that sure if it will work or not. But even if it does not, I don't really care that much as its just one of the 40 or 50 trades I do every month. I just take the lost and move on to the next great trade.
We really have a great run in July for the QQQ. The last trading bar which is a doji points to the bulls a need for cautious.
You can see from the chart of SPY 60 min above that it is clearly in a 60 min trading range. Some comfort for the bulls is that, it ended the month of July near the top of the trading range. This at least shows strength. A breakout above will be bullish.
THe weekly chart of SPY shows we are clearly in a bullish long term uptrend. Even if August takes a dive, you can see there is ample support beneath and that is a fertile ground for bottom fishers.
XLY is consolidating beautifully and is near its 20 MA. This daily pattern is usually bullish as it has enough rest before taking off. But a bad seasonality chart for XLY may dampen breakout bulls.
The chart of the Dollar Index above shows that it broke out of a trading range, it was a consolidation at support kind of pattern which is usually bullish. But you can see that the FED always rules. The saying that, don't fight the FED is true and whatever chart pattern will usually bow to the pressures of FED and its decision. The drop of the dollar index sparked a rally in Gold and Silver stocks.
NEM, a gold stock actually broke out of a trading range ahead of the breakout in Gold. Usually gold stocks and silver stocks lead the base metal itself.
You can see from the chart above how SLW, also broke out ahead of Silver itself.
The breakout of the US dollar from its trading range sometime ago, made oil fall but the recent drop in the US dollar make me suspect that the 60 min downtrend in oil might be ending. You can see that the USO gave 2 very good 60 min box shorts. But I pointed out in yesterday's analysis I suspect that the 3rd box might not work. You can see that USO is forming a 3rd box and a rise above the 20 MA and the box might end the downtrend but a break below will make the downtrend continue to the next stop which is about 9.20.
I really love 60 min consolidation at support box trades. You can see how STOR gave a nice trade for those who are observant.
Will be writing my August 1 st week stock market analysis after monday's close. So stay tune and enjoy this journey with me.
Will be writing my August 1 st week stock market analysis after monday's close. So stay tune and enjoy this journey with me.
July 29 2016
With stocks like Facebook, Amazon and Google and Apple reporting good earnings its no wonder that the QQQ and XLK a grinding higher each day. As we approach the month of August in next monday, there is a need to be cautious as August has proven to be a difficult month for stocks in the past. However, with lots of support in the QQQ, I take comfort that it might not be so easy for stocks to drop so easily.
Meanwhile, a look at the weekly charts of some tech stocks are telling us that in the long term, things are beginning to look good for them. Never mind the daily volatility but on the weekly charts, the tech stocks are telling us they may be starting to have a new leg up. Albeit it may take a long time because after all this is a weekly chart.
Amazon on the other hand is breaking a downtrendline at daily support and with good earnings it may just pop up and start a new measured move target. By the way notice the heavy volume before the earnings announcement? Some investors or traders really put quite a lot of money in.
The XLP, consumer staples is meeting its 50 ma support as well as price support, so those who are short XLP component stocks may want to cover up a bit. There are probably also some 60 min longs from these component stocks.
The last chart I want to show you is the USO. Oil looks beaten and no matter what people say, we are in a definite downtrend in the 60 min. So all kind of shorts strategies in the 60 min timeframe will be in play. The next low on the daily chart I can see is around 9.10, so I will remain bearish till the 60 min chart tells me so or when USO reaches around 9.10.
July 28 2016
Yesterday we had a day where the news of Apple's earnings dominated the trading day with the FOMC's announcement not having much effect on the markets. Earnings are the key it seems and they continue to drive the markets. The markets affected by the FOMC is the USD which went lower after that and gold and silver which went higher after that.
The major indexes are sending mixed signals. The DIA is weakening with a probable break of an uptrendline in the 60 min charts. While SPY is still trading sideways and the QQQ propelling higher and resuming its uptrend because of tech earnings.
The major indexes are sending mixed signals. The DIA is weakening with a probable break of an uptrendline in the 60 min charts. While SPY is still trading sideways and the QQQ propelling higher and resuming its uptrend because of tech earnings.
Historically, the month of August for the past 7 years has not been very good for the SPY. So, we might want to be a bit cautious entering August. You can check out Stockcharts.com's seasonality chart of SPY here. But let's not get too worried yet as SPY has not drop below the consolidation yet and even if it does, there is ample support around the 212 area.
On the other hand, Apple which reported great earnings look set for a favorable month in August as seasonaly, it does well in August. You can check out Apple's seasonality chart here. I recently wrote an article about Apple. Should You Invest In Apple Now? Warren Buffett invested about $1 billion in the stock recently, so should you follow in his footsteps?
On the other hand, Apple which reported great earnings look set for a favorable month in August as seasonaly, it does well in August. You can check out Apple's seasonality chart here. I recently wrote an article about Apple. Should You Invest In Apple Now? Warren Buffett invested about $1 billion in the stock recently, so should you follow in his footsteps?
Facebook just reported earnings and it was blowout. Stock is likely to open higher in trading hours and this will be good news for the tech sector. Be on the watch for earnings from Google as well after the close.
No matter what SPY or DIA is telling us, the QQQ and XLK is still in an uptrend. So the bias is still bullish until the chart tells us not too.
You can see from the charts above that gold and silver seem to have found support at the 20 MA and the indicators seem pretty bullish. Couple with the the dollar index which dropped after the FOMC, this may set up another leg higher for these 2 metals.
The gold and silver index looks set to break a daily box. Lets see if it can break another box this time.
In summary, the major indexes are sending a mix signal with the DIA weaker, the SPY sideways and the QQQ in a solid 60 min uptrend, while the IWM has broken out above the trading range. Traders on the long side should be cautious entering the month of August but I don't think I shall worry yet till there is substantial weakness yet. Since the DIA is made up of 30 stocks and the SPY and QQQ are made up of more stocks I shall still be slightly bullish till the 60 min charts tell me otherwise.
In summary, the major indexes are sending a mix signal with the DIA weaker, the SPY sideways and the QQQ in a solid 60 min uptrend, while the IWM has broken out above the trading range. Traders on the long side should be cautious entering the month of August but I don't think I shall worry yet till there is substantial weakness yet. Since the DIA is made up of 30 stocks and the SPY and QQQ are made up of more stocks I shall still be slightly bullish till the 60 min charts tell me otherwise.
July 27 2016
Markets again traded sideways with the SPY not moving much. But DIA has shown further weakness by declining below recent trading range. On the other hand, the QQQ brokeout above a recent trading range. With good earnings from Apple, the QQQ will likely gap up in today's session keeping the bulls alive.
If the after hours price holds to the open, Apple will gap up above the recent resistance which will now act as support. It will also likely to break out of a weekly downtrendline. I have written an article on Apple titled Should You Invest In Apple Now. I wrote about Warren Buffett who invested about 1 billion into it and should you also invest in it.
July 26 2016
Major indexes are still meandering in the trading range. However, the DIA has shown two weakness. First dropping slightly below the lows of the trading range and having a 60 min bearish 20 cross 50 MA. It later recovered a bit. I won't read too much into the price action of the 3 indexes as they are still in a trading range. Perhaps the FOMC on wednesday will have enough news that will propel the market higher or make it go lower. We shall see.
Although there is weakness in the DIA, I'm not too worried looking at the chart of QQQ. THe many consolidation areas will provide support and its kinda difficult to short stuff with lots of support. Unless a big gap happens in the QQQ I guess the next few days and perhaps next week, the trading ranges will still hold.
Some charts like the daily charts of IWM, MDY and XLY shows that they are indeed making a beautiful consolidation. Not the wide whippy ones typical of tops. Anyway, lets hope they touch the 20 MA and setup a beautiful breakout.
There are troubles with oil as it fell these few days. The rising US dollar index is affecting them and a look at the daily chart of USO below shows us that it is now below its declining 20,50 and 200 MA. This sets up wipeout trades environment. Any green bar that appears. When a red bar wipes it out and go below the low of the green bar, we can short it.
In summary, I don't think there will be much movement today until Wednesday's FOMC. Till then perhaps its wise not to initiate any positions today. Let's check the charts often to see what the markets are telling us.
July 25 Intraday Update
The DIA has gone below the 60 min trading range and showing weaknesses. All 3 major indexes are below their 5 min 200 MA at the moment, so no new short term positions should be taken. Older short term positions can still be kept since there are support underneath but will have to access each individual stock's chart to see what action should be taken.
