Observations; Entering $FB and $GOOGL

SP500 has easily regained several key resistance levels. 

SP500 Daily

- Price has returned to the prior range and is now back "at the scene of the crime"
- Currently price is above the 200 DMA (yellow) which is also rising.
- Double Bottom pattern from 8/24 and 9/29 is in motion targeting new highs.
- Resistance should remain within the prior trading range. 

SP500 Weekly

-Price has retaken the 20 WMA which is still declining
-Lower Low/ Potential Lower High on weekly timeframe still in play until a new breakout can occur.
-Volume broke its 3 week downtrend, posting an accumulation week.

 -Many strong new breakouts are occurring

+ Entering Facebook

Facebook moved to all-time highs this week on increasing volume. The stock has shown good resiliency by managing to hold above its prior range. It now looks like a successful retest/consolidation of the early summer breakout.

Initial stops will be placed below the retest/consolidation at $86 on a weekly closing basis.

+ Entering Google 

Google posted strong earnings this week and the stock has moved to new highs. Similar to FB, GOOGL built a consolidation pattern above its prior range and is now resuming on increasing weekly volume.

Initial stops will be placed at the recent swing low at $617.

MCD

GE

AMZN

MSFT

HD

PEP

PM

-SPDR Sector Top 10 holdings remain 2-1 downtrending vs uptrending.

The majority of the top 90 stocks in the SP500 look like this:

SLB

PG

CAT

XOM

PPG

MON

MS

The charts above, and 2/3 of the Top 90 SP500 stocks are displaying downtrend behavior. Some are holding better than others, but the majority remain under pressure and should act as a drag on the major indices.


-The VIX has been crushed and is now back in a low volatility state

Bottom line: Markets have rebounded strongly to the surprise of many (myself included). The majority of the most heavily weighted stocks in the SP500 remain under pressure, but more new breakouts are appearing each week. 

As always we try to focus on the leaders. With the market sitting in the middle of its year-long trading range I prefer to be positioned in names that are already through their highs, and avoid those that are near or just bouncing off recent lows.

For the last year or more, most new breakouts have been sold following their moves to new highs. Recently however real leadership is emerging. These leaders are identified as those which held up better than the majority of stocks during the recent decline. They built solid bases to rally from once the market bounced back. 

When markets correct, the best way to spot potential leaders is by seeing which stocks build bases near their highs and which ones just crumble under the pressure. Once markets stabilize those that built bases will regain new highs quickly. While those that breakdown will simply bounce in a counter-trend way.

Thanks for reading
-ZT