BigTrends

Well, that title is a bit facetious.  I believe the eyes of the world will be on us  this weekend a some historic legislation is about to be passed.  Yes, it effects everyone across the globe from a financial and economic perspective.  Frankly our markets have been distracted from anything from healthcare to march madness.  I can understand the angst over this huge bill, it's likely to be passed over the weekend.  If not, does the market rally?  Did it sell as a prelude?  But to assume the market has to correct for that reason alone is downright silly.  There are a MILLION reasons to sell, but only ONE reason to buy. 

Just look around charts and you'll find a plethora of stocks that are moving higher from relatively nice bases.  Of course, not every setup is perfect, and some are better than others.  One that caught my eye recently was Buffalo Wild Wings (BWLD).  This had a big drop (see chart) and ran right back up, but the buy point was an advance over the solid resistance, which fell like a hot knife through butter.   Still a buy?  Test that lower trend line and then I would start a position.

Gold is starting to regain its shine and I am expecting a move back to 1200 soon.  The metal tested 1100 on multiple occasions of late and held its ground.  The dollar is elevated but that has not knocked down gold as much.  Room for the dollar and gold?  That's what the market is telling us.  Gold will be in breakout mode after it eclipses 1156, where a swift move higher is a strong probability.

Commodities are also on the radar.  Today many coal names were upped and given higher targets by UBS after having come down some 3-5% of late.  My favored area is the fertilizers, specifically POT, MOS, AGU.  Last week Potash RAISED their estimates significantly and today they are saying inventory levels are 16% below their 5 yr average.  The last time a similar condition existed potash prices went parabolic.  For price reference, POT is 50% below its alltime high, MOS is 70% below and AGU is 35% under its alltime high.  They are highly volatile momentum names, but the conditions are good right now for some robust gains over the next several months.

The Fed meeting just snuck up on us, did you know there was a one day session scheduled?  I don't expect much change from the last meeting, perhaps some discussion about the intermeeting discount rate hike, and I would not be surprised to see this moved higher once again.  Talk about the weaker jobs market and the effect on the economy will no doubt headline the discussion.  I'll be watching bonds and the short end of the curve for some clues.  The market is sanguine about rates currently, VIX settling around 18%.

One of the best patterns to play in a bull market is the cup/handle, coined appropriately by William O'Neil of IBD fame.  This chart pattern shows a big surge after a pause (cup) in the stock price then a rest on lower volume (handle), which tends to look like a coffee cup (hence the name).  This is a timeless pattern that has worked in every bull market.  Last week, I was scouring chart after chart and all I could find were these patterns.  I don't recall having seen so many setups since 2004, which turned out to be a pretty good year for stocks.  An example of a current cup/handle is below.

Ok, that title was a bit of a joke there.  Fertilizer stocks are on the move tonite with a big guide up from Potash, a favorite of ours.  We can look  to POT, MOS, AGU and IPI to lift higher on Friday and likely beyond.  The charts were setting up nicely too, and this will likely put these stocks in breakout mode.  We'll be looking for an opportunity for a trade here, taking advantage of the surprise and low volatility for an upside trade.

Lately we've been seeing good leadership in stocks, and yet the indices are just slowly moving forward.  This may be the best of all worlds, for the 'wall of worry' is up.  How so?  First, we've seen stocks breaking higher on lower volume.  Normally this would concern me, however the 'non believers' are out there.  Frustrated bunch, aren't they?  Retail has been strong of late but traders may fade the retail sales number due out on Friday.  Tech has been strong and financials are waking up.

That's a good question.  By some metrics yes, we're overbought and due for a pullback.  But by and large the indices ae not in nosebleed territory.  Oh sure, the markets are up 3% or so over the last week, and over 6% since the last reaction low on Feb 25.  Given the low VIX we don't expect to see massive surges, in fact the SPX has had only 2 days of a 1% move since mid Feb, nearly a month.  It's been a jagged climb since early February.  But the important question is leadership.  Are we seeing it and more importantly, is it credible?  The fact is rotation is the name of the game now, and what's the flavor of the day may not be it tomorrow.  Until that changes the momentum may carry stocks to the January highs, just more than 1% from here! 

I use different timeframes and like to see confirmation over a different series, of course when all the technicals are in alignment we have a high probability trade.  The daily chart shows great formations for Grandslam trades, while the hourly setups are much better for Extreme ideas.  Here's what is showing up this am: