- I start with an overview of the major indices. These charts contain a 7-period Simple Moving Average, a 30-period Exponential Moving Average, and the 14-period Slow Stochastic %K line. That's it. The trading bias is based on this:
- Long Only if SMA(7) > EMA(30) AND %K > 50.
- Short Only if SMA(7) < EMA(30) AND %K < 50.
- Any other combination, I'll either stay out of the market or stick to one or two day duration trades based on the direction the SMA(7) is headed.
Dow Jones Industrial Average - LONG.
S&P 500 - LONG.
Russell 2000 - LONG.
NYSE All Issues - LONG.
In all four cases, however, the %K is at an extreme high position and as of Friday began trending down. While the bias is long, due to the risk being called out by the %K, we'll keep our stops very tight. Risk of a pullback in all four indices this week is near extreme.
The three strongest sectors beating the S&P 500 for the week were:
- Materials Sector (XLB)
- Financial Sector (XLF)
- Industrial Sector (XLI)
Economic Reports of Significance (all times are EDT - GMT-4)
- 10:00 - Housing Market Index
- 16:00 - Treasury International Capital
- 8:30 - Housing Starts
- 10:30 - EIA Petroleum Status Report
- 8:30 - Jobless Claims
- 8:30 - Philadelphia Fed Business Outlook Survey
- 10:00 - Existing Home Sales
- 9:45 - PMI Manufacturing Index Flash
- 13:00 - Baker Hughes Rig Count
- Before Market Open - Union Pacific (NYSE:UNP)
- After Market Close - Schlumberger (NYSE:SLB)
- Before Market Open - General Electric (NYSE:GE)
- Before Market Open - Honeywell (NYSE:HON)
- Before Market Open - VF Corp (NYSE:VFC)
We'll start the week with a long bias, trading stocks in the Materials, Financial, and Industrial sectors primarily. We'll keep our stops tight due to the extreme level of the Slow Stochastic indicator and will shift to a very short-term (one or two day) strategy if it drops below 50. While there's interesting economic news at the beginning of the week, we'll be especially focused on Thursday and Friday with major market indicators being released and earnings releases from five of the key companies we follow for overall market and sector analysis.