Sunday, August 07, 2016

Trading Outlook for the Week of August 8-12

A jobs report that far exceeded expectations saved what had promised to be a down week in all indexes.  Instead, all sectors except Utilities finished higher, with technology leading an extremely robust surge.  The flight from utilities matched a similar flight from the 10-Year Treasury which saw a 5.3% increase in yield on Friday.  Both of these moves signal a renewed confidence in the health of the US economy, although it's prudent to remember that nothing is more whimsical than the confidence level of the average equities trader.

The Technologies sector - and with it, the Nasdaq - continues to shine.  A note of caution is in order there, since it is now trading well above its 20-day moving average.  Be aware that a consolidation will likely follow such a strong upward charge that is now over 6-weeks running.

We're seeing some healthy sector rotation playing out with Financials joining Technology at the head of the class while Health Care and Industrials have slid into neutral territory.  We'll keep an eye on Consumer Staples late in the week since the all-important Retail Sales number will be released on Friday.  Energy, of course, continues to show weakness in the face of continued depressed oil prices.

Thursday and Friday are the big days when it comes to economic news.  We'll be especially interested in the Import/Export numbers in light of the growing strength of the dollar against the British Pound and the Euro.  The Retail Sales and Consumer Confidence numbers will shape our strategy heading into the weekend.

Here's a summary of the week ahead.

Trading Bias 

Large Caps - Long
Mid Caps - Long
Small Caps - Long
Nasdaq - Long


Showing strength
XLK - Technology
XLF - Financials

Showing weakness
XLE - Energy
XLP - Consumer Staples
XLU - Utilities


XLV - Health Care
XLI -  Industrials

Economic Reports of Significance (all times are EDT - GMT-4)

Monday, 8/8/16

  • No reports of market significance
Tuesday, 8/9/16
  • 08:30 - Productivity and Costs
Wednesday, 8/10/16
  • 10:00 - JOLTS
  • 10:30 - EIA Petroleum Status Report
  • 14:00 - Treasury Budget
Thursday, 8/11/16
  • 08:30 - Jobless Claims
  • 08:30 - Import and Export Prices
Friday, 8/12/16
  • 08:30 - Retail Sales
  • 08:30 - PPI-FD
  • 10:00 - Business Inventories 
  • 10:00 - Consumer Sentiment
Earnings Reports Watched for Sector or Market Significance

Tuesday, 8/9/16
  • After Market Close - Disney (NYSE:DIS)

Our bias remains long, and we will pay closer attention to Nasdaq stocks and Financial stocks.  With the sector strengthening, there may be some good dividend plays that also show short-term growth.  Watch for signs of consolidation in the Tech sector, and watch sector rotation carefully for some hidden gems that may be on the upswing.  Sectors across the board are staying firmly above their 7-day moving averages, and the Slow Stochastic indicator remains above 50 in all capitalizations, so we are only considering long positions at this time.

As always, trade the market you see, not the market you want.  Remain nimble, stick to your trading plan, and always know your exit strategy before entering the trade.

Happy Trading.

No comments :