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Morning Call Express: So Far, So Good

Scott Redler

First I want to apologize that my note has been very inconsistent over the past month or so (with few updates during trading). I pride myself in keeping a routine/habits and recently my schedule has been inconsistent due to outside circumstances that have all been taken care of.
With that said, we are now on the fifth trading day of the year. Some headlines are saying if you are up the first week/month it's a good sign for the year to come. I will say it's been a bit tricky so far considering the majority of the gains happened in the first two days. But as this market digests above the recent gap is when set ups happen and you see relative strength take fold. I will be playing the 8/21-day moving average like I did last year during the first quarter. Typically strong stocks ride them and that typically happen during intermediate trends, so I try to use that as my guide vs. headlines and banter moving forward.
If you look at the SPY's you will see the gaps have been protected and the 8-day MA just played some catch-up. The gap pivot support is $144.73, and we've been building a nice floor above that. This is a nice spot to trade against. Bigger support under that is the 21-day at $143.63. To get back in some motion, we need a micro close above $145.91 then $146.61. Above this area and then $148.11 is the next pivot resistance.
Lots of themes continue from last year. Homebuilders remain strong and so do the banks. Industrials with some ags are acting better. Each one of these groups are building a high level consolidation above last year's highs with gaps intact and the 8-day catching up.
XLF pivot gap support is $16.74. XHB is $27.12. XLI is $38.51. MOO is $53.54. These groups continue to show relative strength. The IWM, the Russell 2000, blasted off on New Year's Day and holds in well, which is always a good sign. This group didn't lead much of last year. Pivot support on this index is $86.04. As traders monitor composure/speed/action, all these upside gaps remain intact. We will see if that continues.
In a new year you try and see if some money rotates. At this point nothing is blaring. OIH and XLE are in the middle of last year's range and so it tech. You can check out these charts and they are in the middle of last year's range and trying to hold up. See if that continues.
The casinos that fell off the radar in second half of last year did perk up and get back in play last week. That LVS capitulation low on July 26th was a nice spot if you remember. It did just clear another channel around $48 and is showing some commitment. WYNN and MGM act better and will be on my trading plan more frequently as well. MGM has been moving well since the break out above $11.
Metals held major support areas. GLD held $158.50, let's see if that continues. This metal is building a huge Descending Channel and it's either going to resolve it and break above or break big support. I have no interest here yet. An igniting close above $164 could get intermediate-term market participants back.
The TLT short/TBT long trade finally triggered and lasted for a bit. This arrangement just rested. For faster money to stay with the TBT you would think $64.50-64.60 holds and we don't see a close into this gap.
As we head into earnings it's that much more important to measure your commitment and time frame. I will send out my PPT later this morning with some individual names and levels..


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