Sunday, August 2, 2015

$DJX - Insights & Emotions

Your Emotions Can Be Useful


July provided a lot of opportunities for retail investors but talking to my readers and others in my circle, you'd be hard pressed to find much market optimism.  I'm not immune to the negative feelings but I try to use them as a trigger towards positive actions and when in doubt, I consult the chart!  I try to keep in mind that charts are there to tell me the story of all the human behavior behind the market. 

So, What's the Story?


  • In July 2014, $SPY did -1.35% and this year it did +2.26%. Most of the gains this year occurred in the first two weeks of the month (+4.5%). We had a follow through day on July 17th but the rally fizzled soon after and the market gave back half of those gains! Thus, the popular opinion tells us that July was a bust!

  • In July 2015 the $NASDAQ outperformed the $SPY by twice as much. The $QQQ index that I prefer to study was up by $4.56% this month. This was mostly lead by just a few stocks such as $GOOG, $GOOGL and $AMZN. However, it's important to note that it wasn't a broad rally and, most of those gains came as a results of earnings activity.

  • The $DJX has been quite a disappointment for July as it was up a mere +0.46%.  The index is still trading below the 200 simple moving average (SMA).  The index is made of stocks that are multinationals and a reflection of our Industrial sector ($XLI), the Materials sector ($XLB) and the Energy sector ($XLE). It is also a reflection of a downturn in the world wide economies and a very strong dollar.
On that note, I've had some interesting conversations lately with Tyson Conrad, who has a background in recruiting electrical engineers for large scale construction projects.  With his work being on the front line of the construction industry, he's uniquely positioned to see how all of this this lackluster $DJX activity affects the industry.  

Interestingly enough, his business is booming because there's a rise in the need for automation and the deployment of cutting edge technology - which is what electrical engineers excel at!  Now, look at which sector is showing the most strength and think through things logically.  When any industry experiences a slow down, you can expect that there will be someone who benefits! 



Who Made My Watch List?


For access to my full watch list with side by side comparisons, you can subscribe to my weekly watch list and trade plan service.

Some of the items on my watch list are extended but don't be surprised if there's still some juice left in them. Now that earnings out of the way, they're a safer bet but as always, I will only take a very small position in them and I refuse to chase them if they pass their buy point.  Instead, I'll wait for them to retrace to the specific buy point enumerated in my trade plan:

$VRX
$CELG
$EW
$UHS


Other Opportunities



Over the past 3 weeks, I've been keeping tabs on the Consumer Discretionary ($XLY) as well as Consumer staples sector ($XLP).  Several stocks in each sector present opportunities for a low risk, short term option trade.  These stocks aren't technically on my watch list yet, but they've definitely appeared on my radar: 

$WBA
$CVS
$RAI
$MO
$DIS
$SBUX
$CMG
$NKE
$FFIV
$EBAY

Be careful this week and as always...Happy trading!


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Do not take a position unless you are prepared to sustain a TOTAL LOSS. Your loss could include the money you invested as well as commissions and transaction charges.


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