Tuesday was a pretty bad day for the market after the Fed raised rates and indicated that it may not be done. However, as good as Tuesday was, Wednesday was 3 times better. We had new relative highs across the board, Nasdaq, Small Caps, Mid Caps, and Big Caps all had great days. Important sectors also led. We also saw heavy volume AND advancers led decliners by nearly 3 to 1 on the NYSE and 2 to 1 on the Nasdaq. No matter what, 3 to 1 and 2 to 1 A/D numbers are strong. Additionally we are starting to see strong leadership in a number of sectors which shows that we have broad participation right now. Among the best sectors are Oils and Energy, Transports, Biotechs, Fiber Optics, Financials and Consumer Goods.
Something I want you to play close attention to is AAPL and GOOG. Now, GOOG just announced a SECOND secondary in the last 6 months to raise more cash, this is not something that is thrilling share holders. However, both stocks have drawn a line in the sand and that is important because they have been clear leaders of the bull market. With out them it would be difficult for the market to continue higher. AAPL bounced off its 200 day moving average almost to the penny. If I was short AAPL I would want to cover that trade. I will be watching this rally closely and the pullback even closer. A small pullback on light volume and I will be a buyer of AAPL.
This weekend I am going to come out with a special report on Oil and Energy, but the short version is that the SECULAR BULL MARKET in energy stocks has resumed in my opinion after having pulled back for some time. I have been buying stocks that showed clear leadership when the sector pulled back. How do you find clear leaders? When an entire sector has a pullback, we as traders are given a gift by the market. How? Because as the group pulls back we want to identify the stocks that are NOT pulling back, we want to find the stocks that resist the selling pressure and hold strong. Examples include DO, DNR, DRQ, TRGL, PEIX, and WFT. Please note that I have had open long positions in each of these stocks since Tuesday. These are POSITION TRADES, which means that my intent is to hold them for one quarter or longer. In the case of energy I think it is very clear that we are in the middle of a secular bull market, and that Oil is the most likely sector to turn into a bubble. Please note that it has not yet turned into a bubble, I suspect this is a few years out and when it starts to get bubbly we definatly want to have some positions that have been open for some time to take advantage of the speculative excess.
Aside from Energy FIber Optics are in vogue. Some fo the better names include FNSR, AVNX, MRVC and BWNG. This is a strong theme to keep an eye on and profit from, though I think the oil theme is by far THE STRONGEST IN THE MARKET. I think that Japan and the rest of Asia have resumed their upside march. Profits can probably be made with EWJ, JOF, EWS and FXI among others. Gold is another secular bull market that seems to be resuming its march higher. GLD is the the exchange traded fund which represents ownership in gold. I have also been getting myself exposure to the broader market by putting on positions in MDY, IJR and EEM.
An important potential storm on the horizan to continue to be aware of is long term interest rates. A move over 5% breaks a multyear downtrend and could have severe implications for the market. IEF and TLT shorts provide a good way to play the short side of rates.
If you have any questions or comments, or would like my assistance with your own personal portfolio please feel free to email me
brandonlfredrickson@gmail.com