The S&P 500 bounced back from a sharp selloff and reclaimed the 20-day EMA. If the S&P 500 closes above the 20-day EMA on Monday, then our timing model will shift back to buy mode.
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Stock Market Update and Industry Group Leadership
The model portfolio is 100% in cash.
There is very little reason to hold long positions right now as the reward-to-risk ratios are not favorable.
$CLF is a good example of how difficult it has been to make progress. Even if one continues to hold, it’s tough to do so with size.
The Nasdaq closed near the highs of the session but had to rally just over 2% from the open to get there. Any bounce may have a tough time sticking due to all the resistance around the 50-day MA.
An ugly reversal day in the S&P 500 and in leading stocks could lead to further weakness if the 20-day EMA does not hold. If the S&P is in a rising channel with tight swings, then low-risk buy points off support should work better than buying breakouts (in individual names).
The S&P 500 remains the leading broad-based index after holding support of the rising 20-day EMA last week (as did $DIA). Current leadership is solid, with financials, retail, building-related, and commodity-based stocks setting new highs.
There is one new official setup for Friday in the energy ETF $XOP. We already have some exposure with $XEC but wanted a bit more.
We like the tight action at the 50-day MA after clearing the downtrend line. Our buy entry is over the high of Thursday’s bullish reversal candle and the high of 4/29 (the swing high). We have split stops, with half below Thursday’s low and the other half below the swing low.
For those who are a bit more aggressive, the ETF $GUSH is also buyable using Thursday’s low as a stop.
There is one new official setup for Thursday in $LESL.
$LESL has formed a cup with handle pattern and may soon be ready to clear the handle high.
There is one new official setup for Wednesday in $FCX.
$FCX has formed a two-month-long base that is 25% deep. Note the tight price action near the highs of the base with a dry-up in volume. Our entry is over the two-day high.
There is one new official setup for Tuesday in $CLF. $CLF cleared a short-term downtrend line two weeks ago after reversing off the 50-day MA. The price action reversed just shy of the 50-day MA last Friday, followed by a tight-ranged inside day on Monday.
We like $CLF over the two-day high, looking for the price to follow through to the upside and take out the downtrend line.
The stop is just beneath the low of Monday’s inside day, which is below the 10 and 20-day EMAs.
