{"id":44146,"date":"2018-06-10T01:35:14","date_gmt":"2018-06-10T08:35:14","guid":{"rendered":"https:\/\/drduru.com\/onetwentytwo\/?p=44146"},"modified":"2018-06-10T01:53:58","modified_gmt":"2018-06-10T08:53:58","slug":"t2108-update-180608","status":"publish","type":"post","link":"https:\/\/drduru.com\/onetwentytwo\/2018\/06\/10\/t2108-update-180608\/","title":{"rendered":"Above the 40 (June 8, 2018) – A Promising Stock Rally Comes Up Short of Important Threshold"},"content":{"rendered":"

AT40<\/strong> = 69.6% of stocks are trading above their respective 40-day moving averages (DMAs)
\nAT200<\/strong> = 57.1% of stocks are trading above their respective 200DMAs (a 4-month high)
\nVIX<\/strong> = 12.2
\nShort-term Trading Call<\/strong>: neutral (“almost bullish”)<\/p>\n

Commentary<\/strong>
\nFriday started out in bearish fashion. Apple (AAPL) took a broadside from yet another one of those alarming supplier reports (this time Nikkei<\/a>). The gap down and quick 1.5% loss seemed to dampen the mood across big cap techs. (I of course seized upon the pullback as a golden entry for my weekly Apple call-buying trade). Following the previous day’s slam against semiconductor stocks from a broad downgrade from Cowen, tech looked down for the count to close the week. <\/p>\n

On Thursday, the volatility index, the VIX, managed its first gain after four straight down days. The follow-through on Friday seemed to confirm that buyers were finally exhausted. AT40 (T2108), the percentage of stocks trading above their respective 40DMAs, piled into the alarm bandwagon. On Thursday AT40 traded above the overbought 70% threshold only to close below it. On Friday, it seemed to follow-through on this bearish rejection of overbought conditions.<\/p>\n

After about 90 minutes of trading on Friday, buyers gained their resolution. After the dust settled, the VIX managed to hold onto a gain, but the NASDAQ and the PowerShares QQQ ETF (QQQ) rallied to close even on the day. The S&P 500 (SPY) did even better by rallying to a 0.3% gain and a fresh 3-month high.<\/p>\n


\n
\"AT40<\/a>
AT40 (T2108) STILL cannot break through the 70% overbought threshold. The trading action is like tantalizing slow motion.<\/figcaption><\/figure><\/p>\n
\"The<\/a>
The NASDAQ made a fresh all-time high this week, but the achievement was overshadowed by a weak close to the week.<\/figcaption><\/figure>\n
\"The<\/a>
The PowerShares QQQ ETF (QQQ) tested the bottom of its upper-Bollinger Band (BB) channel before closing flat on the day.<\/figcaption><\/figure>\n
\"The<\/a>
The volatility index, the VIX, faded hard from its high of the day for a second day in a row. Still, the fear gauge looks like it is trying to hold the lows again.<\/figcaption><\/figure>\n

\"The<\/a>
The S&P 500 (SPY) closed the week on a strong note as it continues to follow-through on May’s breakout and successful test of 50DMA support.<\/figcaption><\/figure>
\n<\/center><\/p>\n

The trading action took me right to the edge of flipping bearish and loading up on SPY put options. The tension could not be better placed given a G7 meeting that ended with President Trump demanding that the economic forum reinstate Russia’s membership<\/a> and rankling the U.S.’s traditional allies<\/a>. As I type, Trump is landing in Singapore for his summit with North Korea’s leader. Moreover, the Federal Reserve will almost certainly raise interest rates in its next policy statement due on Wednesday, June 13th. So far in 2018, the S&P 500 has consistently performed poorly in the aftermath of Fed statements (see chart above).<\/p>\n

The currency markets are also on edge. While the U.S. dollar index (DXY) is in pullback mode, the Australian dollar (FXA) faded hard against the Japanese yen (FXY) in what looks like the fourth failure around the 84.4 level for AUD\/JPY.<\/p>\n


\n
\"The<\/a>
The Australian dollar versus the Japanese yen, AUDJPY, is once again failing to confirm the latest bullish sentiments in the stock market.<\/figcaption><\/figure>
\nSource: TradingView.com<\/a><\/strong>
\n<\/center><\/p>\n

With alarm bells faintly ringing in my head, I decided to take a step back and look at a weekly chart of the S&P 500 (SPY). This view from the clouds provides a great reminder of the longer-term bullish price trend that remains underway.<\/p>\n


\n
\"This<\/a>
This weekly view of SPY shows a strong upward price trend on an extended break. The week’s strong close puts the index in position for a major breakout that would challenge the all-time high.<\/figcaption><\/figure>
\n<\/center><\/p>\n

CHART REVIEWS<\/strong><\/p>\n

Alcoa<\/strong> (AA)
\nI thought I missed an opportunity to buy back into AA<\/a> at 200DMA support. The stock pulled off a gap and crap after another steel and aluminum tariff announcement, and I averaged into a position. Now AA is stuck in near neutral as it continues to cling to 200DMA support.<\/p>\n


\n
\"Alcoa<\/a>
Alcoa (AA) is churning above its 200DMA….awaiting the next catalyst.<\/figcaption><\/figure>
\n<\/center><\/p>\n

Amazon.com<\/strong> (AMZN)
\nI locked in profits on my calendar call spread ahead of AMZN’s near parabolic move that ended right around $1700. The three days of rest after the latest all-time high looks just like the pause needed to refresh…<\/p>\n


\n
\"Amazon.com<\/a>
Amazon.com (AMZN) nearly went parabolic on Wednesday, the last three days have provided some healthy rest. Selling volume and depth dropped each day, so this is likely the pause that refreshes.<\/figcaption><\/figure>
\n<\/center><\/p>\n

Camping World Holdings<\/strong> (CWH)
\nMy hunt for beaten up stocks to play in the case of an extended overbought rally brought my gaze upon the RV stocks. CWH came first to my attention thanks to Jim Cramer<\/a>. I was sloppy in failing to establish a starter position. Now the stock is already up 25%+ in three trading days and has to contend with downward trending 50DMA resistance.<\/p>\n


\n
\"Camping<\/a>
Camping World Holdings (CWH) is up 25.7% in just 3 days on extremely high trading volume. A 50DMA breakout should make this stock even more bullish.<\/figcaption><\/figure>
\n