{"id":38405,"date":"2017-03-07T21:50:00","date_gmt":"2017-03-08T05:50:00","guid":{"rendered":"http:\/\/drduru.com\/onetwentytwo\/?p=38405"},"modified":"2017-03-07T22:08:58","modified_gmt":"2017-03-08T06:08:58","slug":"t2108-update-170307","status":"publish","type":"post","link":"https:\/\/drduru.com\/onetwentytwo\/2017\/03\/07\/t2108-update-170307\/","title":{"rendered":"Above the 40 (March 7, 2017) – A Growing Undertow for the Stock Market"},"content":{"rendered":"

AT40<\/strong> = 48.9% of stocks are trading above their respective 40-day moving averages (DMAs)
\nAT200<\/strong> = 63.5% of stocks are trading above their respective 200DMAs
\nVIX<\/strong> = 11.5 (volatility index)
\nShort-term Trading Call<\/strong>: neutral<\/p>\n

Commentary<\/strong>
\nMarket weakness continued to grow today even as the major indices barely notched losses on the day. AT40 (T2108), the percentage of stocks trading above their respective 40-day moving averages (DMAs), did something it has not done in 79 trading days: it closed below 50%. AT40 has now erased all but four trading days of post-election gains.<\/p>\n


\n
\"AT40<\/a>
AT40 (T2108) close at a level last seen shortly after the November U.S. Presidential election.<\/figcaption><\/figure>
\n<\/center><\/p>\n

Without AT40, the current marginal declines in the major indices would look completely harmless. Instead, my alarm bells are ringing incrementally louder. Yet, I STILL cannot flip bearish because the S&P 500 (SPY) easily avoided closing below the low of the trading day before its last bullish breakout (2359). Note that both the S&P 500 and the NASDAQ (QQQ) are (marginally) trading below their respective uptrends defined by their upper-Bollinger Bands (BBs).<\/p>\n


\n
\"The<\/a>
The S&P 500 (SPY) is orderly drifting into last week’s gap up.<\/figcaption><\/figure><\/p>\n

\"The<\/a>
The NASDAQ (QQQ) is heading toward its uptrending 20DMA support – something the tech-laden index has not done since the beginning of the year.<\/figcaption><\/figure>
\n<\/center><\/p>\n

The volatility index, the VIX, is also showing next to no signs of stress.<\/p>\n


\n
\"The<\/a>
The volatility index (VIX) gained 1.9% on the day as it barely acknowledged any stress on the day.<\/figcaption><\/figure>
\n<\/center><\/p>\n

Perhaps the most critical test that appeared at the end of the day happened for small-caps. The iShares Russell 2000 (IWM) closed at its low of the day…right on top of support at its 50DMA. Granted, multiple 50DMA breakdowns starting a little over a month ago failed to generate follow-through selling. <\/p>\n


\n
\"The<\/a>
The iShares Russell 2000 (IWM) closed right on top of 50DMA support.<\/figcaption><\/figure>
\n<\/center><\/p>\n

While the growing bearish signals have made me more and more wary, I continue to look out for bullish (swing) trading opportunities. I found two in somewhat surprising places.<\/p>\n

I last discussed Restaurant Brands International Inc. (QSR) as the short-end of a successful pairs trade with Popeyes Louisiana Kitchen (PLKI)<\/a> where timing turned out to be everything. QSR has closed its last gap up with two very favorable characteristics: 1) declining trading (selling) volume, and 2) a perch right on top of uptrending support at its 20DMA. I typically would wait for confirmation of the buying opportunity with a solid up day on good volume, but I decided to step in given the stock’s earlier momentum. Next support form here would be around $52.<\/p>\n


\n
\"Restaurant<\/a>
Restaurant Brands International Inc. (QSR) is potentially setting up for its next leg higher as it gently kisses 20DMA support.<\/figcaption><\/figure>
\n<\/center><\/p>\n

It is day number four of trading for SNAP, Inc. (SNAP), and the daily drama is alive and well. As a result, my trading strategy for SNAP has become more fluid than I expected.<\/p>\n

<\/p>\n
\n

Covered $SNAP<\/a> near the open. Figured a 10% gap down is pretty bad. Can't get much worse for the day? Looking for new entry. #122trade<\/a><\/p>\n

— Dr. Duru (@DrDuru) March 7, 2017<\/a><\/p><\/blockquote>\n