A Plan For 3M

mmm

Back on Oct. 24th shares of 3M exploded to the upside following a very impressive quarterly earnings report.   MMM finished the session with a 5.9% gain, its best performance in years.  Two days later the stock left behind an ugly key downside reversal indicating the big rally that carried it over 32% higher this year had reached exhaustion.  3M has been tracing out a healthy pullback since, one which may have further to go.  We expect MMM to fill the huge post earnings breakout gap as this plays out.  A dip down to the $223.00 to $222.00 area will offer a low risk entry opportunity.  

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

JNJ

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High Yield Headed Lower

hyg

High yield corporate bonds, as represented by the HYG and JNK etf’s, have had a horrible November.  The HYG(iShares IBoxx High Yield Corporate Bond Index)began this month with an ugly downside gap.  As it did at key bottoms in March and August the HYG held its 200 day moving average during the first week of the month.  This week the 200 day has given way as downside volume surged.  Today the HYG is continuing the breakdown and is trading below the August low.  The only monthly low the index has not taken out at this point is the March/2017 lows.  With overhead pressure now very intense, from both the 200 day and 40 week moving averages, more downside is ahead.  We expect the 2017 lows to be tested before year end.  This level($86.00)is a major support zone. 

INTC

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Bubble?

What bubble?  These charts offer quite a contrast between stock ownership just prior to the major stock market top in 2007:

Attachment-1

And the current environment:

Attachment-1(1)

 

One Year Ago Today

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Emerson Electric Extends Sell Off

emr

Emerson Electric suffered serious damage as October came to a close.  On 10/31 the stock fell over 4% on extremely heavy trade, quite a reversal from the new high print just two days prior.  EMR managed to stabilize ahead of yesterday’s pre open earnings report but shares have been under pressure since.  This new down leg will likely drive the stock lower in the near term.  For patient investors a dip down to the $61.50 area, which includes the March, April, June and August highs, will create a very low risk entry opportunity.  Just below this zone is the 200 day moving average($60.65). 

At time of publication we do not have a position in EMR.

Banks Are Heavy

jpm

The recent bond market strength is beginning to take a toll on the financial sector.  The banks in particular are looking quite heavy.  We are expecting more downside as this sector continues to pullback from the recent highs.  JP Morgan is one we’re keeping a close eye on.  The stock broke below its ten week bull channel yesterday and is off again today.  A drift down to the summer highs now appears likely.  This key support zone runs from $96.00 to $94.00 and includes the July/August highs as well as the 50 day moving average.  If shares can regain their footing here a very low risk entry opportunity for this high quality bank will develop.

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

MCD (Weekly)

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Hot By Halloween

The S&P 500 Index was up over 15% by Halloween this year.  A move of that size is pretty rare(17 times in history).  What happens next?  The Index finishes off the final two months of the year higher 16 of 17 times:  

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