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Are Stocks Bracing for a Pullback?

By  +Follow July 25, 2013 9:47AM
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As earnings season chugs along, a look at the over equities market shows that stocks may be a bit stretched for the time being. Whether operating results can give investors that extra boost to push the market over key territory remains to be seen. We asked Toni Turner of TrendStar Trading Group for her thoughts in this week's interview.

EQ: It’s still early in the second quarter earnings season, but so far we’ve somewhat of a mixed bag. Financials, however, have had a very strong showing. Does this bode well for the market?

Turner: Yes. In fact, if it weren’t for the companies in Financials, corporate earnings would be negative. That’s how well they’ve done. If you look at the monthly chart of the Financial Select Sector SPDR ($XLF), we can see that the XLF made an all-time high on May 2007 at $38.15. As you know, it moved in a downtrend from that high down to its March low at $5.88. It closed at $20.64 on Wednesday, so it definitely has a ways to go to reach 2007 highs. Still, the XLF has definitely been in a nice uptrend since July 2012.

If we go from the monthly chart,  to a daily chart, then we see more detail. We see that the leaders of the Financials and top components of the XLF, such as JPMorgan Chase ($JPM), Wells Fargo ($WFC), Bank of America ($BAC), and Berkshire Hathaway ($BRK-A), got ahead of themselves in  the short term. Now, I suspect  the financial sector  is  due for a dip. The housing recovery has certainly given momentum to the the regional banks in the SPDR S&P Regional Banking ETF ($KRE). Regional banks  are still moving higher,  closing on their highs, and appearing unstoppable—but of course, we know better than that.

I suspect that the KRE will succumb to a little profit taking pretty soon because nothing goes up forever. From a big picture perspective though, we want strong banks and for them to continue to be strong because that’s good for the economy.

EQ: You’ve been watching the PowerShares QQQ ($QQQ) for a while now and observed that it was a bit overstretched. Now that Microsoft ($MSFT), Google ($GOOG), and Apple ($AAPL) have reported, do you think the investors may be looking to take profits out of Tech?

Turner: Apple certainly held up the QQQ on Wednesday.  But Microsoft, Google, and Intel are losing some altitude here, and in general, Tech has come out with some disappointing earnings. The QQQ is trading above $74, but there’s an open price gap from earlier in July, and it’s a gap that needs to be filled between $75 and $73.

Since Wednesday was not an up day, and we’ve had two days to the downside, meaning two red candles in a row. Usually, it tells us that even though they’re trading within the same price range, it may indicate that people are taking profits here. While I can’t project what will happen, I wouldn’t be surprised to see the QQQ come down to at least $73 in the near future.  

And  if the QQQ can’t hold support there, then  it may take another leg down to the 71.50 level.

EQ: The S&P 500 walked up to the 1700 level and pulled back this week. What are your thoughts of the likelihood of it breaking through? What are the implications if it fails to do so?

Turner: It did pull up to almost 1700, and I think a lot of it had to do with expectations that it would, and so it did. That’s a good thing, but markets usually get softer in the summer. We have seen very little of that happening this year, except for the small dip we experienced  in mid-June.

Now if we look at the 14-day relative strength indicator (RSI), it is pointing lower. . I think the market is tired here and a lot of people are gone for the summer. If interest rates begin to climb here—and certainly, it looks like that may happen again as the 10-year bond has fallen off—it may remind us of the upcoming Fed’s tapering.   

I went through hundreds of daily stock charts on Monday, looking through the components from many of the major  indices, and  a hgh percentage of those stocks  were extremely overbought, and trading in nosebleed territory. And, of course, valuations are rising.. I wouldn’t be surprised, and I certainly wouldn’t be upset if we took a breather, here.  It would provide promising opportunities to enter new positions.

EQ: Are there any sectors or industry groups you’re watching right now?

Turner: I’ve gone through a lot of the sectors and other things that I normally watch, and except for maybe a few stocks, I’m really not really excited about going long on much of anything right now. That doesn’t happen to me very often. That said, if we see an orderly dip in the regional banks and the KRE, I will be watching for entry opportunities in that part of the financial sector.

EQ: What are your thoughts on adopting a short strategy right now?

Turner: Despite its warts, the market is in a textbook  uptrend right now, and while you might be able to short an individual stock, you would be going against the prevailing direction of the trend. So the odds of success can be less than selling short in a downtrend, or substantial market weakness.  less. You can short the pullback in day trades , but if you are not nimble, you can get stopped out quickly.  It just takes one talking head on TV or in an article to make one comment to spark the market to move back up--and you end up getting caught in a short squeeze that can result in an unnecessary loss. .

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions.


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Muathe
23 Nov 14 10:06:29
[VIDEO REPOST] Weekend Market Analysis 11/23/2014 [PUBLIC] $XLE $IWM $GDX $XLF $EEM $EWZ $VXX $FXI $TZA $JNUG $QQQ http://t.co/ZAWpLhAP9z
MoneyShow Trading
23 Nov 14 09:55:07
$XLB $XLV $IYT $XLI $XLF did your ETF keep pace with the market last week? http://t.co/HTpoqtFQVz http://t.co/o3Bevi5aec
Traders Expo
23 Nov 14 09:54:43
$XLB $XLV $IYT $XLI $XLF did your ETF keep pace with the market last week? http://t.co/0IeQYlOBzO http://t.co/Lrgh2ilB2z
TomAspray
23 Nov 14 09:54:24
$XLB $XLV $IYT $XLI $XLF did your ETF keep pace with the market last week? http://t.co/6j9zLI7RyJ http://t.co/gR0xJZgxUj
MoneyShow
23 Nov 14 09:53:43
$XLB $XLV $IYT $XLI $XLF did your ETF keep pace with the market last week? http://t.co/LGOalkEUSp http://t.co/jadTUwdPDx
Michael W
23 Nov 14 08:41:03
RT "@WallStJesus: RELATIVE ROTATION GRAPH πŸ‘‰ http://t.co/kl2Mfy8QPA $XLE $XLP $XLU $XLX $XLF $SPY http://t.co/z5o7rkzfmC” - nice! Ty
Dexter
23 Nov 14 07:10:19
RT @WallStJesus: RELATIVE ROTATION GRAPH πŸ‘‰ http://t.co/Bke8TqxmPw $XLE $XLP $XLU $XLX $XLF $SPY http://t.co/tEPGWYbBkP
Alexey
23 Nov 14 06:42:05
RT @WallStJesus: RELATIVE ROTATION GRAPH πŸ‘‰ http://t.co/Bke8TqxmPw $XLE $XLP $XLU $XLX $XLF $SPY http://t.co/tEPGWYbBkP
InversBioTech
23 Nov 14 06:40:29
RT @WallStJesus: RELATIVE ROTATION GRAPH πŸ‘‰ http://t.co/Bke8TqxmPw $XLE $XLP $XLU $XLX $XLF $SPY http://t.co/tEPGWYbBkP
natetrades
23 Nov 14 06:36:50
RT @WallStJesus: RELATIVE ROTATION GRAPH πŸ‘‰ http://t.co/Bke8TqxmPw $XLE $XLP $XLU $XLX $XLF $SPY http://t.co/tEPGWYbBkP
fractalhedge
23 Nov 14 06:34:06
β€œ@WallStJesus: RELATIVE ROTATION GRAPH πŸ‘‰ http://t.co/GTyaDc2fDp $XLE $XLP $XLU $XLX $XLF $SPY http://t.co/vZts4qU7Q5”
Hi Roberts
23 Nov 14 06:27:39
RT @WallStJesus: RELATIVE ROTATION GRAPH πŸ‘‰ http://t.co/Bke8TqxmPw $XLE $XLP $XLU $XLX $XLF $SPY http://t.co/tEPGWYbBkP
aziz saba
23 Nov 14 06:07:46
RT @WallStJesus: RELATIVE ROTATION GRAPH πŸ‘‰ http://t.co/Bke8TqxmPw $XLE $XLP $XLU $XLX $XLF $SPY http://t.co/tEPGWYbBkP
Tony B
23 Nov 14 05:57:11
RT @WallStJesus: RELATIVE ROTATION GRAPH πŸ‘‰ http://t.co/Bke8TqxmPw $XLE $XLP $XLU $XLX $XLF $SPY http://t.co/tEPGWYbBkP
Michael Hurt
23 Nov 14 05:56:08
RT @WallStJesus: RELATIVE ROTATION GRAPH πŸ‘‰ http://t.co/Bke8TqxmPw $XLE $XLP $XLU $XLX $XLF $SPY http://t.co/tEPGWYbBkP
JE$US
23 Nov 14 05:53:03
RELATIVE ROTATION GRAPH πŸ‘‰ http://t.co/Bke8TqxmPw $XLE $XLP $XLU $XLX $XLF $SPY http://t.co/tEPGWYbBkP
Darlene S Williams
23 Nov 14 05:32:50
@DSWzonepicktick @XE @WPCAREYALUMNI @DiscoverCotton @ShopFloorNAM @RedHatStorage @NASDAQ $XLF #PENDINGCOUNSELARBITRAGELITIGATIONSARBITRATION
Bagholder
23 Nov 14 04:15:00
$XLF 3 weeks tight? $MS $WFC $C looking similar
Hedge AccordingLy
22 Nov 14 21:38:37
William Dudley of New York Fed Defends Big Bank Oversight Before SenateΒ $XLF http://t.co/ThKM8fKaf4
WallStFuturePro
22 Nov 14 20:11:04
$XLF showing bearish pattern
Peak Discounters β˜…
22 Nov 14 19:11:07
RT @MatrixMarkets: S&P 500 Ends Week at All-Time Closing High http://t.co/rnDoixOETm $SPY $QQQ $IWM $SMH $XLF $AAPL $BABA $GLD $GOOGL http:…
FollowBackFest β™ͺ
22 Nov 14 19:10:46
RT @MatrixMarkets: S&P 500 Ends Week at All-Time Closing High http://t.co/rnDoixOETm $SPY $QQQ $IWM $SMH $XLF $AAPL $BABA $GLD $GOOGL http:…
Baidu Planet ●
22 Nov 14 19:10:25
RT @MatrixMarkets: S&P 500 Ends Week at All-Time Closing High http://t.co/rnDoixOETm $SPY $QQQ $IWM $SMH $XLF $AAPL $BABA $GLD $GOOGL http:…
Apple Reporter ●
22 Nov 14 19:09:07
RT @MatrixMarkets: S&P 500 Ends Week at All-Time Closing High http://t.co/rnDoixOETm $SPY $QQQ $IWM $SMH $XLF $AAPL $BABA $GLD $GOOGL http:…
Google Investor ♦
22 Nov 14 19:08:45
RT @MatrixMarkets: S&P 500 Ends Week at All-Time Closing High http://t.co/rnDoixOETm $SPY $QQQ $IWM $SMH $XLF $AAPL $BABA $GLD $GOOGL http:…
Boom Doom Economy ♦
22 Nov 14 19:07:33
RT @MatrixMarkets: S&P 500 Ends Week at All-Time Closing High http://t.co/rnDoixOETm $SPY $QQQ $IWM $SMH $XLF $AAPL $BABA $GLD $GOOGL http:…
Osprey Flyer ^v^
22 Nov 14 19:05:10
RT @MatrixMarkets: S&P 500 Ends Week at All-Time Closing High http://t.co/rnDoixOETm $SPY $QQQ $IWM $SMH $XLF $AAPL $BABA $GLD $GOOGL http:…
Matrix Markets $
22 Nov 14 19:03:37
S&P 500 Ends Week at All-Time Closing High http://t.co/rnDoixOETm $SPY $QQQ $IWM $SMH $XLF $AAPL $BABA $GLD $GOOGL http://t.co/TxlMtf01uw
Abel Daltrey
22 Nov 14 17:15:41
aJefqWkhPn Midweek Stock Mkt Analysis 10/22/14 $SPY $QQQ $IWM $XLF $SMH $AAPL
Stockaholics
22 Nov 14 13:26:46
578% Gains On Penny Stocks in one month! Plus a New Pick Is Coming: http://t.co/2W3yKD2d5Q $XLF $F $FN $MSFT
Cornholio
22 Nov 14 09:24:11
@hmeisler $XLF gets really skewed by $BRK.b
Green to Gold Group
22 Nov 14 05:35:18
#Tampa - Currency Fixing Top Bank Scum Shame on you Check out this video from http://t.co/eHnhy0mV0G $XLF $FXE $UUP $EURUSD $DIA $SPY FOREX
Green to Gold Group
22 Nov 14 05:31:46
Currency Fixing Top Bank Scum #Shameonyou Check out this video from http://t.co/whqhj48ntk $XLF $FXE $UUP $EURUSD $DIA FX FOREX @cspanwj
Stockaholics
21 Nov 14 23:46:38
578% Gains On Penny Stocks in one month! Plus a New Pick Is Coming: http://t.co/2W3yKD2d5Q $XLF $F $FN $MSFT
Hedge AccordingLy
21 Nov 14 20:23:45
Zacks Analyst: JPMorgan Chase, Morgan Stanley, Goldman Sachs and Bank of America | $GS $BAC $MS $JPM $XLF | http://t.co/CoT2o22W8l
StockCharts.com
21 Nov 14 17:46:52
Technical Alert: Financial Sector ETF sets new 4-year high $XLF http://t.co/vygj1dQe3S #sccalerts #stockcharts
Ben Silverberg
21 Nov 14 17:17:18
Leading market sectors higher Friday included: $XLF $XLE $USO $XLB $XME $IYR $XLI $ITB $TLT $FXI $KOL $SLV and many more.
dalestrnad
21 Nov 14 17:16:06
At this point $free can fish for sardines & have a better stock price.OVERSOLD!!!Starting a position again. $spy $gdx $ung $aapl $xlf $xop
Stockaholics
21 Nov 14 16:04:12
578% Gains On Penny Stocks in one month! Plus a New Pick Is Coming: http://t.co/2W3yKD2d5Q $XLF $F $FN $MSFT
Mark Mansfield
21 Nov 14 14:38:54
RT @paulwoll: $QQQ $XLF other bearish "topping" candles.... to end the day...
ShortStockVolume.com
21 Nov 14 14:32:06
Top Shorted Stocks 11/21/14... 14. $AMX 71.30% 15. $XLF 70.63% 16. $EWT 70.62% 17. $JNS 70.56% 18. $EEM 70.00% 19. $USO 69.32%...
ShortStockVolume.com
21 Nov 14 14:32:03
Top Shorted Stocks 11/21/14... 13. $FAST 71.96% 14. $AMX 71.30% 15. $XLF 70.63%... http://t.co/NAclvFr0qe
MJR
21 Nov 14 14:25:41
$ES_F Only megaphone invalidated on close is $DIA Dow .6 month wide bear megaphones still intact in $XLY $QQQ $XRT $SPY $XLF weekly charts
Robin Murray MD CFII
21 Nov 14 13:30:58
RT @paulwoll: $QQQ $XLF other bearish "topping" candles.... to end the day...
WallStreetConsensus
21 Nov 14 13:23:27
Index/Sectr $DIA, $SPY, $QQQ, $IWM, $XLB, $XLE, $XLF, $XLI, $XLK, $XLP, $XLU, $XLY, $XRT, $XLV, $IYT http://t.co/KAeWhc8n9u
Woll Street
21 Nov 14 13:19:46
$QQQ $XLF other bearish "topping" candles.... to end the day...
GrenadeTrade
21 Nov 14 13:07:18
Bullish outside weeks for the financials have not been a good thing for $XLF this year. Posted one this week.
Thomas Miskiewicz
21 Nov 14 12:56:06
RT @Flower_Power_67: #HalfTimeReportEspresso FINAL CALLS: Stephanie Link β€”> buy $DG Mike Murphy β€”> buy $HTZ Dr J β€”> buy $RLGY Josh Brown β€”>…
FlowerPower
21 Nov 14 10:27:44
#HalfTimeReportEspresso FINAL CALLS: Stephanie Link β€”> buy $DG Mike Murphy β€”> buy $HTZ Dr J β€”> buy $RLGY Josh Brown β€”> buy $XLF
lookn4wins
21 Nov 14 10:14:12
$XOP Candlesticks $XOP Most recent stock chart and technical analysis. $XLF $GRCU $TZA $CNQ.TO $T $CANF http:/ http://t.co/EYWz38Q6hw
				
				
By  +Follow July 25, 2013 9:47AM
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