World markets are mostly green Monday morning as China gives a thumbs up to the reform plan unveiled at the third Plenum, including the easing of the one-child policy as well as some key property reforms. Shanghai was up almost 3% as the FXI starts to break out after a nice consolidation period. The Nikkei was basically flat, but that is healthy after the big move it staged last week.
US markets made new highs into the weekend as this rally stretches further. Some key intermediate-term moves started on 11/08 as the strong jobs report trapped some shorts and created a day for adjustments. Then last Wednesday when the market reversed and took back 1760 you had a spot for action and on the close of that day we took out 1775 with some authority. Here we are four days later kissing 1800. This has been the story of the tape, if you have one foot in the door and the other out, you better make sure to know the levels and how to move those feet.
Today we are up small and trying and figure out what’s next. Friday’s high is 1798 and the 8-day, which we are now extended from, stands at 1778ish (intermediate support). We could keep going into year-end, but trying to make money as we hit 1820-1840 will not be the easiest task (it never is).
In today’s Morning Call we check the temperature of sectors, which all look very strong but some stronger than others.
The Transports (IYT) and Consumer Staples (XLP) showed lots of relative strength since the beginning of this rally on October 9th as both of these sectors have been making new highs. IYT set a new record high at $129 on Friday. Holding above the 8-day EMA at $127 would be healthy for higher prices.
XLP had a nice breakout on Thursday and nice digestion on Friday, showing commitment. Use the breakout level of $43 as the new support floor.
The Financial Sector ETF (XLF) also joined the rally on 11/08 as its engulfing move put it back on traders’ radars. Then late last week it had a nice three-day rally to set a new high at $21.15. Some digestion above $20.90-21 would be constructive for additional momentum in the coming sessions.
The Biotech ETF (IBB) also had a nice move back to near highs. A break above $212.80 could lead to some additional gains.
The Industrials ETF (XLI) had nice three-day move into highs like the rest of the market. It’s hard to buy Day 4 to the upside as the 8-day is below at $49.51.
The Homebuilder ETF (XHB) has been in a range now for the past five months. It’s now at the upper end of that range, and at some point it might play catch up above $31.40ish. It’s a little short term overbought here, though.
The Oil Service ETF (OIH) and Energy ETF (XLE) are not leading but look decent if you pick stocks within that group.
We will take a closer look at some individual bank names and set-ups that started to work well again for us.
JP Morgan (JPM) enjoyed a nice three-day move up to break above the downtrend resistance that was in control since July. Look for potential continuation above Friday’s high of $54.96.
Bank of America (BAC) also broke above the downtrend line on Thursday and had great follow-through on Friday. A break above $15.03 would mark a new 52-week highs in this stock and could lead to additional momentum.
Goldman Sachs (GS) finally woke up on Friday, but is very sloppy. It needs a move and close above $165.50 to extend, but is not easy to trade.
Morgan Stanley (MS) already put in a new high at $30.52 on Friday before seeing some profit-taking. Holding above the 8-day EMA at $29.86 could keep its momentum intact.
Citigroup ( C) in Friday briefly broke out of the downtrend that has been in place since September 19th. The stock has a tight pattern and looks poised to potentially see additional gains above Friday’s highs of $50.78 if the market continues to move with a positive tone. I will focus here to see if it plays some catch-up.
High Beta Tech continues its mixed action
Apple (AAPL) tried breaking out above $524 but came back in on Friday. It needs to hold $519 to stay on my radar. Let’s hope it gets going quickly this week above $530.
Google (GOOG) acts well as it needs to stay above $528 to make it easy to stay with. A trade above $1041 with Volume could help it break out and generate more momentum.
Amazon (AMZN) still acts very well after its engulfing move on 11/14. Now it needs to stay above $265ish to maintain momentum.
Netflix (NFLX) had a nice day Friday through our buy area and continues to grind higher.
LinkedIn (LNKD) had a spirited move last week to come back in the game. It needs to hold above $224ish to stay constructive.
Facebook (FB) is trying to re-build after nice two-way action since earnings. It needs to hold above $48ish to stay on traders’ radars for a possible long through $49.60.
Twitter (TWTR) still needs time but is trying to build a floor above $40 for now.
Zynga (ZNGA) finally broke above $4. It now needs to stay above it for a few session, but looks better.
Tesla (TSLA) has been weak since earnings. The stock needs to hold $132ish, otherwise it could see more downside. Perhaps it could do a Red Dog Reversal at that point.
Retail has some earnings this week.
Wal-Mart (WMT) engulfed its down day on its report.
Target (TGT) needs to stay above $66 for a potential move through $67.
JC Penney (JCP) has been a great vehicle for us the past few weeks, it still looks good as some funds have been reporting that they bought shares down here.
Solar names continue to act well, you just need to pick one and get to know them. The group has recently been led by by Canadian Solar (CSIQ) and First Solar (FSLR), but some lower level names are also playing catch-up, so look through them.
At this point it’s all about the set-ups. With the markets up 25%+ for the year, the bigger moves have come in individual stocks. Now it’s time to preserve performance and potentially look to add cash flow in ways that make sense for you. Now is not the time to go “all in” but it’s also not the time to be a stubborn short rolling it up.
Disclosure: Scott Redler is long AAPL, GOOG, BAC, JCP, TGT, LVS, NUAN, GERN. Short SPY.