STTG Market Recap May 22, 2014

Today may have been an important day for the NASDAQ in an otherwise quiet marketplace.  We finally saw a nearly two month downtrend line broken on the chart – it still needs to make a new higher high but more on that later.  After opening flat to down buyers came in early and the S& 500 added 0.24% and the NASDAQ 0.55%.  There was some decent news out of the housing sector that helped:

U.S. home resales rose in April and the supply of properties on the market hit its highest level in nearly two years, hopeful signs for the stalled housing market recovery. The National Association of Realtors said on Thursday existing home sales increased 1.3 percent to an annual rate of 4.65 million units, marking only the second gain in sales in nine months.  While that was a bit less than the 4.68-million unit pace economists had expected, it suggested the sector was regaining its footing after stumbling in the second half of 2013 under the weight of higher mortgage rates and house prices.

As noted earlier we finally have broken a downtrend line in the NASDAQ.  That is step 1; step 2 will be to make a new higher high which is the top dotted line.  If that happens above 4185 or so it will be an environment to take on more risk, as long as that 4185ish holds.

nasdaq spx

Transports are showing a lot of strength which is usually a good indicator for market health:


We’ve been pounding the table on emerging markets via the ETF (EEM) for 6-7 weeks now as it broke a long term downtrend in late March, and broke out yet again early May.  This one continues to look great.


Let’s continue to watch these biotechs as well – as goes the NASDAQ has gone the biotechs the past few years.  We have a VERY similar situation to the NASDAQ with the ETF for the group (IBB) in that we are testing an area to create a new “higher high”; the ETF tried today but failed a bit.  Getting over that dotted line – and holding it – would be bullish.


Yelp (YELP) is another former momentum name that looks be breaking out of a long term downtrend.  It is important for these breakouts not to fail in the coming days but we are starting to see a pattern of money moving back to these beaten down issues that suffered for a few months.


While we don’t focus on specific stock picks here at STTG I do want to point out one we did make on May 13th – it was for 3D printing stock 3D Systems (DDD).  At the time, the stock was just under $50, and it looked to potentially be forming a bullish “inverse head and shoulders” pattern – we described it this way:

Last, let’s look at a former momentum favorite which MAY be trying to carve out a bottom – 3D Systems (DDD); a 3d printing stock.  It is currently in a potential inverse head and shoulders formation – that is one low (first shoulder)… then a new lower low (head)…then a third low which is not lower (second shoulder).  I’ve drawn a potential neckline which the stock attempted to break over today but failed.   If the stock falls back below the $45 level, it probably needs more time but if the market turns up for a sustained period this is the type of stock that could see a nice move.

This was the chart on May 13th:


If you took that trade you’d be sitting on a nice 10% gain in under 2 weeks; the stock never broke the $45 level we noted would be an area to stop out of.  Yes, don’t we always wish it was that easy.



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