{"id":48616,"date":"2019-06-16T00:29:25","date_gmt":"2019-06-16T07:29:25","guid":{"rendered":"https:\/\/drduru.com\/onetwentytwo\/?p=48616"},"modified":"2019-06-16T00:56:48","modified_gmt":"2019-06-16T07:56:48","slug":"t2108-update-190614","status":"publish","type":"post","link":"https:\/\/drduru.com\/onetwentytwo\/2019\/06\/16\/t2108-update-190614\/","title":{"rendered":"Stock Market Indices Loiter While Awaiting News On Rate Cuts – Above the 40 (June 14, 2019)"},"content":{"rendered":"\n

AT40<\/strong> = 42.2% of stocks are trading above their respective 40-day moving averages (DMAs)
AT200<\/strong> = 46.0% of stocks are trading above their respective 200DMAs
VIX<\/strong> = 15.3
Short-term Trading Call<\/strong>: neutral<\/p>\n\n\n\n

Stock Market Commentary<\/strong><\/h2>\n\n\n\n

After two bearish fades to start the week<\/a>, the stock market dribbled along. Now the market waits for word on news bad enough to motivate the Federal Reserve to promise rate cuts. This eager anticipation is the main narrative propping up the stock market<\/a>.<\/p>\n\n\n\n

The S&P 500 (SPY) and the NADSAQ (COMPQX) followed similar paths for the week. The former loitered along the top side of its 50DMA, the latter loitered along the underbelly of its 50DMA.<\/p>\n\n\n\n

\"The
The S&P 500 (SPY) is tentatively snaking along its 50DMA support.<\/figcaption><\/figure><\/div>\n\n\n\n
\"The
The NASDAQ (COMPQX) is tentatively snaking along just below its 50DMA.<\/figcaption><\/figure><\/div>\n\n\n\n

The iShares Russell 2000 ETF (IWM) continued to lead the bearish case by ending the week with a 0.9% loss and another failure under 200DMA resistance.<\/p>\n\n\n\n

\"The
The iShares Russell 2000 ETF (IWM) continued its struggle against 200DMA resistance.<\/figcaption><\/figure><\/div>\n\n\n\n

AT40 (T2108)<\/a>, the percentage of stocks trading above their respective 40DMAs, held a slight upward bias for the week moving from 38.9% at the end of the prior week to 42.2%. My favorite technical indicator sits right in the middle of its equivalent of no-man’s land.<\/p>\n\n\n\n

The volatility index (VIX) finally fell into its 15.35 pivot. The VIX underlined the market’s overall slow motion behavior. I used Friday to double down on my call options in Ultra VIX Short-Term Futures ETF (UVXY). The market is setting itself up for potential disappointment with the Fed meeting given its lofty expectations for almost three rate cuts this year<\/a>, so I want to have UVXY call options in place. Moreover, the market has had a bias toward negative reactions to Fed meetings since 2018.<\/p>\n\n\n\n

\"The
The volatility index (VIX) finally slipped and closed on top of its 15.35 pivot.<\/figcaption><\/figure><\/div>\n\n\n\n

Stock Chart Reviews – Bearish<\/strong><\/h2>\n\n\n\n

Apple<\/strong> (AAPL)<\/h3>\n\n\n\n

The posture in Apple (AAPL) flipped again; the stock fell from 50DMA resistance on Friday. My calendar call spread still closed out at my profit target and reminded me of the power and versatility of this options setup. I did not refresh my weekly call positioning (leaving me with my put spread backstop), but I will look to do so on Monday. If AAPL pulls back on Monday I will buy $192.50 or $195 weekly call options. If the stock rallies, I will go for another weekly calendar call spread, probably with a $197.50 strike.<\/p>\n\n\n\n

\"Apple
Apple (AAPL) is back to a bearish posture with a fresh 50DMA breakdown even as 200DMA support held.<\/figcaption><\/figure><\/div>\n\n\n\n

Broadcom <\/strong>(AVGO)<\/h3>\n\n\n\n

“… in the second half, we had expected a recovery. However, while enterprise and mainframe software demand remained stable, particularly in North America and Europe, with respect to semiconductors, it is clear that the U.S.\/China trade conflict, including the Huawei export ban, is creating economic and political uncertainty and reducing visibility for our global OEM customers.

As a result, demand volatility has increased and our customers are actively reducing inventory levels to manage risks. This leads us to believe the second half of 2019 will be more in line with the first half as opposed to the previously expected recovery…<\/p> Broadcom Inc. (AVGO) CEO Hock Tan on Q2 2019 Results – Earnings Call Transcript from Seeking Alpha<\/a><\/cite><\/blockquote>\n\n\n\n

This quote summarizes the importance of the disappointing earnings report from Broadcom (AVGO). I am surprised the stock bounced back from its 200DMA breakdown. I do not expect a relief rally strong enough to fill the post-earnings gap down. I will fade such a move. A close below the May low around $250 would confirm the bearish breakdown.<\/p>\n\n\n\n

\"Broadcom
Broadcom (AVGO) lost 5.6% but buyers bounced the stock out of a 200DMA breakdown.<\/figcaption><\/figure><\/div>\n\n\n\n

Advanced Micro Devices<\/strong> (AMD)<\/h3>\n\n\n\n

I am going out on a limb to call Advanced Micro Devices (AMD) (short-term) bearish. The stock caught my attention again with a gap up to a new all-time high that was immediately followed by 4 straight days of selling. The stock looks like it experienced a blow-off top. With Broadcom (AVGO) flagging warnings for the semiconductor industry, I felt more convinced in the risk\/reward of trying puts again. I am keeping the short-term target modest at a test of rising 50DMA support, but I think AMD is due for a 200DMA retest.<\/p>\n\n\n\n

\"Advanced
Advanced Micro Devices (AMD) fell for 4 straight days after gapping to a new all-time high.<\/figcaption><\/figure><\/div>\n\n\n\n

Deere & Company<\/strong> (DE)<\/h3>\n\n\n\n

I am still waiting for a good entry for buying put options on Deere & Company (DE). With the stock struggling with converged resistance from its 50 and 200DMAs, the stock sits at a critical juncture. I am staying patient with a bearish entry target below last week’s low. Note that a close above converged resistance would be very bullish for DE.<\/p>\n\n\n\n

\"Deere
Deere & Company (DE) keeps knocking on converged resistance from its 50 and 200DMAs.<\/figcaption><\/figure><\/div>\n\n\n\n

Intel <\/strong>(INTC)<\/h3>\n\n\n\n

I sold my last tranche of Intel (INTC) between-earnings call options once the stock traded above its upper Bollinger Band (BB). It was a timely sale as the stock pulled back from the over-stretched conditions. INTC also sold off a bit in sympathy with AVGO. I am still sitting on my earlier tranches of call options. INTC stays in a bearish posture as long as it trades below its converging 50 and 200DMAs. I will only buy more call options when sufficient upside potential exists between the price at that time and this resistance level.<\/p>\n\n\n\n

\"The
The upward momentum for Intel (INTC) officially ended with Friday’s 1.1% loss.<\/figcaption><\/figure><\/div>\n\n\n\n

Nike <\/strong>(NKE)<\/h3>\n\n\n\n

Earnings are coming up for Nike (NKE) on June 27th. After a strong bounce off the May low that saved the stock from a 200DMA breakdown, buyers quickly lost interest. All week, NKE tried and failed to break through overhead 50DMA resistance. The technicals look bearish enough for a return to 200DMA support. CNBC’s Options Action gave a convincing extended bear case based on valuation and post-earnings reactions over the last 8 quarters. The Jul\/Sep $77 calendar put spread looks like a cheap way to play the likely downside scenarios.<\/p>\n\n\n\n

\n

Nike shares tripping 7% from an April record, and @Michael_Khouw<\/a> says it might be time to bench the stock. $NKE<\/a> pic.twitter.com\/o9GEWnAzek<\/a><\/p>— Options Action (@OptionsAction) June 14, 2019<\/a><\/blockquote>