{"id":44426,"date":"2018-07-01T22:20:38","date_gmt":"2018-07-02T05:20:38","guid":{"rendered":"https:\/\/drduru.com\/onetwentytwo\/?p=44426"},"modified":"2018-07-02T13:00:15","modified_gmt":"2018-07-02T20:00:15","slug":"t2108-update-180629","status":"publish","type":"post","link":"https:\/\/drduru.com\/onetwentytwo\/2018\/07\/01\/t2108-update-180629\/","title":{"rendered":"Above the 40 (June 29, 2018) – Sellers Reward A Weak Stock Market Bounce With A Bearish Fade"},"content":{"rendered":"

AT40<\/strong> = 48.6% of stocks are trading above their respective 40-day moving averages (DMAs)
\nAT200<\/strong> = 50.7% of stocks are trading above their respective 200DMAs
\nVIX<\/strong> = 16.1
\nShort-term Trading Call<\/strong>: bearish<\/p>\n

Commentary<\/strong>
\nThe market’s gains the last two days validated my expectation for a relief bounce<\/a>. I used this bounce to make more bearish adjustments to my positioning: unloading some longs and reloading on some bearish trades. My positioning included covering my latest short on iPath S&P 500 VIX ST Futures ETN (VXX) and buying back into ProShares Ultra VIX Short-Term Futures (UVXY) call options. For the first time since the February swoon, the major indices ended a week decidedly down. The new superstar iShares Russell 2000 ETF (IWM) ended a 4-week winning streak. I did not find any reason to expect a major bounce ahead. Indeed, I remain firmly (short-term) bearish even though both the S&P 500 (SPY) and the NASDAQ tested support at their respective 50-day moving averages (DMAs) as I had anticipated when first going bearish. <\/p>\n


\n
\"The<\/a>
The S&P 500 (SPY) ended the week right on top of its 50DMA after a week of pivoting around this critical support level.<\/figcaption><\/figure><\/p>\n
\"The<\/a>
The NASDAQ printed a picture perfect bounce off its 50DMA support, but its lower-Bollinger Bands (BBs) are now turning downward.<\/figcaption><\/figure>\n

\"The<\/a>
The Invesco QQQ Trust (QQQ) followed the NASDAQ in making a picture-perfect bounce off 50DMA support. It was also a bit stretched when it traded below its lower-BB.<\/figcaption><\/figure>
\n<\/center><\/p>\n

AT40 (T2108), the percentage of stocks trading above their respective 40DMAs, is the most telling. While major indices were making spirited bounces from support on Thursday, my favorite technical indicator did all it could just to minimize a loss on the day. It created a bearish divergence. On Friday, AT40 was up with the market and traded as high as 53.4% before closing at 48.6%, its low of the day. The fade looked ominous and reinforced the bearish trading action going into the close across the stock market. <\/p>\n

The volatility index, the VIX, started the week gapping up into and then past the 15.35 pivot. The fear gauge spent the rest of the week bouncing away from this pivot. While I guessed correctly that the market could not sustain Monday’s large percentage gain<\/a>, the VIX now looks poised to make another run higher. If the VIX does make another sprint, I will stick to my current strategy of taking profits quickly on volatility-related positions (in this case selling my latest tranche of UVXY call options).<\/p>\n


\n
\"The<\/a>
The volatility index, the VIX, held support at the 15.35 pivot and now looks poised to make another run higher.<\/figcaption><\/figure>
\n<\/center><\/p>\n

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

Apple<\/strong> (AAPL)
\nDespite my bearishness, I am sticking to the AAPL weekly call buying strategy; I consistently find it best not to overthink this strategy. The last three weeks have been busts although last week I managed to close out my position at even after doubling down on Monday’s gap down. AAPL managed to close the week above its lower-BB channel, so the stock maintains a flicker of hope for more upward momentum before gravity takes over again. In fact, any ability of AAPL to move higher from here could provide an early signal that my bearish thesis for the overall market is coming to an end.<\/p>\n


\n
\"Apple<\/a>
Apple (AAPL) drifted higher all week after Monday’s gap down. It held 50DMA support along the way.<\/figcaption><\/figure>
\n<\/center><\/p>\n

Amazon.com<\/strong> (AMZN)
\nI am watching AMZN for a potential Bollinger Band (BB) squeeze. AMZN showed off all week by trading well above 50DMA support.<\/p>\n


\n
\"This<\/a>
This past week, Amazon.com (AMZN) dropped from fresh all-time highs. Its 20 and 50DMA uptrends remain essentially intact.<\/figcaption><\/figure>
\n<\/center><\/p>\n

Axovant Sciences<\/strong> (AXON)
\nBuyers finally showed up this week in AXON. I decided to restart a position into Friday’s intraday fade. Thursday looked like a successful test of 50DMA support, but Friday’s fade wiped away confirmation of the bottom. I am committed to buying up two more tranches if weakness continues from here.<\/p>\n


\n
\"Axovant<\/a>
Axovant Sciences (AXON) finally slowed its descent culminating in a 50DMA bounce. Buyers still have a LOT to prove.<\/figcaption><\/figure>
\n<\/center><\/p>\n

Home builders: Century Communities<\/strong> (CCS), KB Home<\/strong> (KBH), Pulte Home<\/strong> (PHM), and Toll Brothers<\/strong> (TOL)
\nWhether I am short-term bearish or bullish, I maintain a soft spot for home builders. This week’s excuse for home builders came in the forms of CCS holding 50DMA support, a successful pre-earnings trade on Lennar (LEN), and KB Home (KBH) actually holding onto its post-earnings gain and closing near its intraday high. Earlier in the week I bought shares of CCS. On Friday, I doubled down on PHM call options. I am pretty sure I am done with home builder trades until the seasonally strong period starts again in November…unless some very special setup appears for a short-term flip. My trades here definitely fly in the face of my short-term bearish trading call, but I am making case-by-case exceptions. <\/p>\n


\n
\"Century<\/a>
Century Communities (CCS) last breakout faded quickly, but the stock remains well-supported by its 50 and 200DMAs.<\/figcaption><\/figure><\/p>\n
\"KB<\/a>
KB Home (KBH) gained 7.3% on a post-earnings breakout above 50DMA resistance. The 200DMA still looms overhead as resistance.<\/figcaption><\/figure>\n

\"Pulte<\/a>
Pulte Homes (PHM) was looking good on a swift run-up toward its 11-year high until sellers relentlessly pushed the stock right through the bottom of the previous channel.<\/figcaption><\/figure>
\n<\/center><\/p>\n

CNBC’s Fast Money hmoved on from promoting a trade on LEN (three times and counting!) to an “it can’t get any worse than this” trade on hapless Toll Brothers (TOL)…<\/p>\n

<\/p>\n
\n

Carter Worth says the chart of $TOL<\/a> is so bad, it's actually good. That's got @Michael_Khouw<\/a> betting on a big comeback for the homebuilder. pic.twitter.com\/Rf5ppTEN9T<\/a><\/p>\n

— Options Action (@OptionsAction) June 29, 2018<\/a><\/p><\/blockquote>\n