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The Long View

bull markets

All good things come to an end, someday. 

Note the two steep pullbacks during the final stages of the longest bull run(green data)in history.

 

Is Costco Poised For A Rally?

cost

Shares of retail giant Costco have been tracing out what is developing as a very solid base.  This process has been quite volatile since the start of July but has shown signs of stabilization this month.  COST still has a few key hurdles to clear but we believe the stock is headed for higher ground.  A rally from current levels could be substantial.

Costco has trading very near its 2017 peak shortly after its last earnings report as June began.  This bullish action was quickly wiped out with a massive breakdown gap on June 16.  COST fell over 7% that day on its heaviest selling pressure in years.  This Amazon/Whole Foods inspired flush damaged the stock severely.  Less than a month later COST had dropped another 12% as it stretched the sell off from the June peak to over 18%. 

In early July COST began to stabilize near major support.  This key zone, between $154.00 and $150.00 allowed the stock to regain its footing.  This area was successfully retested in late August confirming an important low was in place.  COST has been steadily recovering this month and has left behind layers of nearby support.  We believe the stock will need to clear the $166.00 area soon to be clear for take off.  Once past the 200 day moving average, as well as the July and August highs, there is plenty of upside potential.  As this develops we regard the $162.00 to $159.00 area as a low risk buy zone.  On the downside, a close back below $157.00 would violate last week’s low indicating more basing is ahead before a fresh rally leg can take hold.

Costco is scheduled to report fourth quarter earnings on October 5th. 

At time of publication we did not have a position in Costco.

The Most Peaceful Days in History

The intra-day range in the S&P 500 Index over the last six days has averaged 0.21%.   The least volatile trade in the history of the stock market:

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Hat tip Charlie Bilello

 

Is United Airlines Landing?

ual

 We have been monitoring the flight pattern of United Airlines closely since the July 19th breakdown(earnings).  This month the stock has stretched this sell to over 25% and is now very near a major support zone.  We believe this area, near the $57.00 to $56.00 levels, will provide solid support.  A new base here could supply the footing needed for a healthy rebound.  We are now long the stock($58.01)and will add on further weakness.  Additional buys at $57.51 and $57.01 are expected.  A close back below $55.00 would indicate more turbulence ahead.

UAL received a downgrade from Raymond James today.

At the time of this publication we are long UAL.

Oracle Remains Under Heavy Pressure

Further downside will provide a very low risk entry opportunity. 

orcl

Shares of software giant Oracle suffered a major breakdown last Friday.  Following the stock’s first quarter earnings release Thursday afternoon ORCL opened the next session with a huge breakdown gap.  By the close the stock was off over 7% as selling pressure surged to its heaviest level in years.  This was as sharp reversal from the very bullish action earlier in the week.  Just last Wednesday ORCL closed at new all time highs. 

Oracle has continued to fade this week although downside momentum has begun to ease.  Despite this we expect shares to drift lower in the near term after leaving behind an ominous key downside reversal in the weekly chart.  For patient bulls a further decline will produce a very low risk entry opportunity.  As shares near $47.00 investors should be prepared to take action. 

Major support near the $47.00 to $46.00 area should be viewed as a low risk buy zone.  This key zone includes the Oracle’s initial post election peak near $47.00 as well as the powerful post earnings breakout gap left behind back in late June.  As ORCL reaches this area it will stretch the sell off from the 2017 highs to 12% and will likely enter oversold territory.  This is the formula for a bottom, at least a temporary version. 

At time of publication we are long ORCL in some managed accounts. 

Over The Korean Peninsula

b-1b-f-35-f-15-09-2017

A USAF B-1B strategic bomber in formation with South Korean fighter-bombers and USMC F-35Bs.

U.S. Air Force and Marine Corps aircraft conduct a mission with the South Korean air force over the Korean Peninsula, Sept. 18, 2017. The bilateral forces conducted the mission in response to North Korea’s intermediate-range ballistic missile launch Sept. 14. Army photo by Staff Sgt. Steven Schneider

Escalation is a two way street. 

Hat tip strategypage.com/Austin Bay

 

Year to Date Performance

ytd etf performance

SPY(S&P 500 Index)  +13.4%

IWM(Russell 2000 Index)  +6.9%

UUP(US Dollar Index)  –9.8%

TLT(US 20+ Year Treasury Bond Fund)  +7.5%

GLD(Gold Index)  +13.4%

USO(Crude Oil Index)  –13.6%

Trouble Ahead?

As highlighted earlier this month September happens to be the weakest month of the year for S&P 500 returns.  So far September has proven to be quite positive but the weakest part of the month is just now beginning.  A lot can happen over the next two weeks:

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Hat tip Ryan Detrick

JP Morgan Is Headed For New Highs

jpm

Continued weakness in the bond market has given the financial sector quite a boost as a new week begins.  Shares of JP Morgan are moving well after opening today’s session with an upside gap.  The largest of the money center banks is up over 1.3% and is setting up for a run into new 52 week high territory. 

JPM is trading at new September highs at mid day as it extends the rally off this month’s low to over 5%.  Earlier this month the stock dipped down to its 200 day moving average after major resistance near the $94.00 area capped the August high.  This was the third monthly peak in this zone since the March top.  The hold near the 200 day following the most recent pullback from the $94.00 area was very encouraging.  Now that shares have mounted a solid rebound from the 200 day layers of support are in place. 

In the near term we expect JPM to retest 2017 highs.  As this develops the stock is trading near a very low risk buy zone.  The first layer support runs from the initial September peak of $92.35 to last week’s high of $91.70.  JPM still has an important hurdle to clear but once the $95.00 level is convincingly taken out the stock will have room to run.  On the downside, a close back below $90.00 would indicate the heavy supply zone near the 2017 highs is still in control.  Until then JPM will remain on solid footing.

At time of publication we are long JPM in some managed accounts.   

Peace in Our Time

The last four trading sessions were the most peaceful in history:

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Of note, twelve of the top 20 low volatility streaks have occurred in 2017, and there’s over three months left in the year.  Something’s gotta give.

Like maybe a 3% correction?  Well, maybe not, the streak continues: 

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We live in interesting times.

Hat tip Charlie Bilello

 

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