Trucharts Blog - markets update - week ending 10/24/2014

Trucharts.com - Blog Update - Markets week ending 10/24

Another week and wow what a move in the markets - the biggest gain of the year. We stated last week that the markets were oversold - huge VIX move up and oversold markets. And that made it a great week for day traders and people who took advantage of the technical indicators showing an oversold market. And the week was a great one for the traders - options and equity traders - on top of that we had earnings week and a flood of earnings next week (including TWTR and FB). In addition, we have the FOMC meeting next week and then we had Bullard speak the week before for a longer QE and that made the markets rally.

Based on the technical indicators, we expect the markets to move higher for the time being.  We did break a trendline and we need to see if the markets will overcome the rising trendline which we have marked in the charts attached. When we say technical indicators, we are primarily looking at the Volume, MACD crossover, VIX, and RSI which was below 30 for the major averages. During the move up, you can see in the charts below the volume at the bottom of this move up, the MACD crossover (bullish), rising RSI and 13 day MA crossover. The volume has been dropping into this move up. The leadership has been in a small group of sectors, there was heavy shorting into the move down and some of the moves in stocks is due to short covering.

In our portfolio, we were long TUBE, AAPL, USO.  Our GM short is still in place and our IBB short is hurting (we believe the BITOECH/pharma sector is the most crowded trade in the markets - but the biotech sector offers the best opportunity for day traders). We need to see if the current low will be tested and if it will hold - we expect the markets to move up into the FOMC meeting and try to suck in folks as it crosses and closes above the 50d moving average. The trend is higher with a consolidation move expected. Here is a list of stocks we picked from our watch list that moved more than $2.00 - some of these are extended but some look tradeable and we expect these to move to the 50d MA.

In addition we are heading into Q4 - which is very typically a strong season for the markets.  We still like AAPL, TUBE, T and USO/XLE - we think the oil sector is extremely oversold.

Here is a very good link for educating yourself on technical analysis: 
http://finance.yahoo.com/blogs/talking-numbers/learn-moving-averages-210702676.html

Ticker	Open	High	Low	Close	Price Chg	Volume
BWLD	129.8400	135.5000	129.0000	135.4000	129.0000	1044800
GD	130.3400	132.5400	129.8600	132.5000	130.3400	1407700
MCO	95.1000	97.0400	94.4700	96.9400	94.5500	1550500
MTX	65.9600	70.0100	65.7900	69.9300	64.0800	381600
ORLY	167.7300	170.8900	166.8800	170.4800	167.4400	1066700
PVH	114.0000	117.7100	113.4400	117.0000	113.9900	1652100
SIG	113.0600	116.2200	112.7800	115.8300	113.0400	1384000
UDOW	115.7900	118.2600	114.9600	118.0300	115.4600	351100
UPRO	113.0700	115.2400	111.8700	115.0700	112.6900	1295600
VRSN	56.4400	59.8500	56.4300	58.5500	56.3400	1866600
WBC	95.1800	98.4000	94.1800	97.9400	95.1800	1261100
WDAY	86.1600	89.8300	85.5200	89.5100	85.7300	1397000
WIRE	37.3600	40.8100	37.3600	40.0700	37.4400	356700
YY	78.2700	82.5800	78.2000	81.9400	78.7500	1492200

Here are the charts that look very interesting for the indices and the derivative ETFs:

TQQQ ETF