Good morning,

The futures are down slightly this morning and I’m watching the markets closely for continued weakness. Below I posted a market update and again highlight the Russell 2000’s recent movement. I do not have any new stocks for the watch list today – yesterday’s close did not provide much opportunities that I see worth playing.

Stock Futures Drag; Under Armour Caves, MasterCard Rises $SPY $UA $MC  – Stock futures sagged Tuesday ahead of January’s final session, as the Federal Open Market Committee prepared to launch its two-day policy meeting and investors looked to Apple’s (AAPL) quarterly report after the close. Futures for the Dow Jones industrial average and S&P 500 lagged 0.3% below fair value. Nasdaq 100 futures dipped 0.2%. The Nasdaq opens Tuesday up 4.3% so far for January, having gained in six of the past seven months.  The S&P 500 is ahead 1.9% in a third straight monthly advance. The Dow’s 1.1% increase is also its third straight rise. Small caps skipped the party, with the Russell 2000 down 0.4%, its first monthly slip since October. Continue reading here at Investor’s Business Daily.

New 52-Week Highs: $MCHP, $AEIS, $MXL

I am currently hold stock and options in $FCX, $BOFI and $CPE so I will be watching these today for movement. $BOFI beat earnings yesterday after the close.

Opinion: If you get your financial news from MarketWatch, CNBC or Bloomberg you will start to believe that Wall street is shaken to the bone and the recent market pressure is only due because of the recent controversial presidential policies. There is no doubt that our policies regarding trade, foreign relations, and domestic issues can affect the markets, but I do not believe that our financial markets are in absolute turmoil because of it. Why? Its all headlines and little content. The headlines are there to influence you and your behavior. Days before the election, there were countless news stories (on international news as well) about what the markets would do if Trump was elected president. I saw interviews with ‘financial analysts’ that said the world economy would crumble if Trump was elected. More importantly to the news viewer – that includes your 401K and retirement. You don’t think that threat of losing your hard-earned money is a tool to shift your political views? Its absolute BS.

I think our financial institutions and market makers are concerned more about making money and less about their personal political views.. and you should to! 🙂 Now let’s make some money today!

Market Update: The purpose of this post is to share my analysis about the Russell 2000 and its recent price action. All eyes have been on the Dow and it hitting 20,000, but there hasn’t been much chatter about the weakness in the S&P, Nasdaq, Dow and certainly the Russell – at least not in my circles.

In order to for me to keep a close eye to the markets, I rely on moving averages to determine the short, intermediate and long-term trends. When one moves before the others and shows weakness, I will monitor and limit plays against that short-term trend. Since I am a swing trader, I am primarily focused on the next 100 days.

As you can see in the chart above, $IWM failed to reach a new high and closed below the 8-period and 21-period exponential moving averages. The S&P and Dow both closed today in similar positions under their 8/21-period EMAs.

What does this mean?

To me this is a strong sign of weakness and an possibly an early sign of what’s to come to the rest of the markets. We saw this same move last week but the markets popped with new life – and then weakened again back to this level. I am concerned that $IWM:

1. Failed to reach a new high

2. Continues to show declining momentum

3. Nearing a breakdown below $134.50 and the 50-day EMA.

In my system, this weakness is simply a condition and does not require immediate action. I do not sell or adjust any positions based on this, but I will likely be more hesitant to enter new long positions.

What’s next?

If the Russell closes below $134.50 my criteria for cautiousness will be met and certain actions will be taken to limit my risk to the markets. Otherwise, I am holding tight and will limit my exposure as needed.

What does this mean to you?

Leave a comment below and tell me if you think the Russell’s recent price action is a concern.

~ Eric

2017-01-31T05:56:17+00:00 January 31st, 2017|Commentary, Watchlist|0 Comments

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