Good morning, everyone, and welcome to Wednesday morning. It’s Stephen Whiteside here from theuptrend.com. In the pre market this morning, stock index futures are currently down across the board, being led lower by the Nasdaq, which is currently down about 1.5%. At the same time, commodities are continuing to push higher on Wednesday morning. Now, we do have some economic numbers coming out this morning.
We’ve got housing permits and industrial activity coming out before the market opens. Homebuilders were the big winners on Tuesday, up nearly six on the day. So huge move up for homebuilders over the last week. We saw the VIX move up again on Tuesday. So options traders are getting ready for something, and that may be starting today.
We’ve got the Dow having a huge move up on Tuesday, up over 700 points. That particular index was led higher by United Healthcare, Caterpillar, Boeing, and Home Depot. Those were the big winners on Tuesday. We do have Boeing back on a buy signal as of Tuesday’s close. Now, the Russell 2000 looks like this.
That’s not really how a major indices should look. It looks like a stock with a takeover offer. So that’s a little scary at the moment. We tried to hit 225 yesterday. If you haven’t taken money off the table already, you should do so on Wednesday morning and just lock in some profits.
And anytime I say take money off the table, I’m not telling you to completely liquidate a position. You know, if you own 100 shares, sell 50. If you own 50, sell 25. Just get some money off the table back into your account. We want to completely liquidate a position on the first close below the lower channel line, and we’re certainly not expecting to see that on Wednesday morning.
Now, the Nasdaq is still dealing with resistance. That hasn’t changed. The magnificent seven ran up to the dollar 50 level last week and has started to pull back. And those stocks are leading us down in the pre market this morning. We’ll take a look at those in a minute.
Now, the canadian market was able to punch through resistance at 34.38 and run right up to the next target for the iShares, for the TSX 60 at 34.77. Now, it had a lot to do with gold, and gold was up again yesterday. And you can see Barrick was up nearly 5% on the day, so gold certainly helped. But Shopify was the big winner on the TSX 60. It was up over 8% on the day, and it apparently got an upgrade, and that caused the stock to gap higher at the open so we came into Tuesday on a sell signal already.
I’m not sure I would chase Shopify here. I’d give it a couple of days because the rest of the tech sector is pulling back on Wednesday morning. Shopify is down a little in New York and not as much as some of the other biggest tech stocks, but it is pulling back in the pre market. So I’m not sure how much, how long this particular move for Shopify will last, but that’s just my gut feeling. If you love Shopify and want to own it, you know, step in slowly and wait and see if it can gain momentum from here.
Now, looking at the Magnificent Eight, we’ve still got Apple on a buy signal. It closed slightly higher yesterday. We were trying to get to 237.50. We were not able to do so. So we’re maybe pulling away from that level.
We already have Amazon on a sell signal. Now we have Alphabet on a sell signal as of Tuesday’s close, joining Meta and Microsoft already on Sell signals. Nvidia is still holding up, sitting right on the edge of a new sell signal. That would happen on on Wednesday with a close below $126.21. There’s Shopify in New York, Shopify in Toronto, big pop yesterday.
We’re on the wrong side of that, but that happens every once in a while. And then Tesla. Tesla is still on a buy signal here. It’s pulling back in the pre market this morning. So far it’s not enough to give us a sell signal.
That would happen on Wednesday with a close below $235.55. Now it is the bond market that’s causing the stock market to rise at the moment. Bonds started to move up last week. And of course that puts downward pressure on interest rates. And here we’ve got the TLT, the XBB, both on buy signals.
We’ve got emerging market bonds on buy signals, and we have junk bonds moving nicely higher on Tuesday. Now, when I show these charts, I’m hopefully not encouraging any of you to trade bonds. Historically, bonds are not as volatile as stocks, so it’s much harder to make capital gains in the bond market. When we look at how wide the Flypaper channel is, you can see it’s fairly wide. Right now.
The average true range on the TLT is only 1.16%. That is not enough to trade. Where I am interested in trading bonds is in the futures market because you get much more leverage in the futures market than you do with a bond ETF, even if you buy the bond ETF on margin. So the 30 year bond is on a buy signal. The average true range for the 30 year bond is just 1.13%.
But again, you’re not trading it for that. You’re trading it for the leverage in the futures market. And you can see that bond yields are currently on sell signals continuing to head lower. That’s helping fuel this last move that we’re seeing in the stock market. Okay, folks, that is all for Wednesday morning.
We’re looking for some selling on the open on Wednesday morning, and we’ll just have to see if it’s enough to put the Nasdaq 100 back on a daily sell signal. Enjoy the rest of your day. Next time you’ll hear my voice is on Thursday morning.
Stephen Whiteside
TheUpTrend.com
Wednesday, July 17, 2024
