We entered a JWN (Nordstrom)  bear call spread today on a Chaikin analytics overbought sell and relative strength sell signals.   JWN reported last week, so no need to worry about earnings.  The XLY ( consumer discretionary ETF),  to which JWN belongs ,  continues to underperform the S&P and is a great place to look for neutral-bearish trades in this overbought market.  JWN has a very bearish Chaikin Power Gauge rating, the long term Chaikin Trend line is pointing down and price is below the trend.   Additionally, the Chaikin Overbought / Oversold oscillator is currently in overbought  territory and rolling over. Plus, there's  bearish money flow and weak relative strength for better than the past 6 months.  This trade met all of our rules.  We received a decent credit at the open today, with  a  40% reward v 33%  risk.   You can see  all of our options trades here.  

Our review of market conditions shows every major sector overbought.  We're looking for overextended bearish stocks in Discretionary, Staples and Energy to sell out of the money call spreads against as stocks reach significant resistance.  Our forecast is for the market to meander for a few days until overbought conditions are cleared followed a possible move higher.   We, of course, trade what we see not what we think.  But if that happens, Tech, Healthcare and Basic Materials Stocks are where we'll look for Classic Bulls to trend trade to new market highs.

Did you take that Lilly trade with us yesterday?  Cha-Ching!

The market is attempting to take at previous highs, despite some less than stellar economic data. 

Our lack of experience with short term directional stock trades has caught up with us (our wheelhouse is option spreads).  Despite a market that's been cascading upward, we have been stopped out of  most of our recent swing trades, though with very small losses, mostly because of unrealistic stop loss orders just 1 percent below the 10 hour EMA.  Way too tight.  Our theory was that as long as SPX price was below the long term Chaikin trend,  we were best cutting our losses at the first sign of weakness  It's not how we like to trade, and our inexperience neon sign is burning bright.  However, we are still riding LLY and WDC, and we'll stick to our rules until we have enough datapoints to reassess..  See all of our trades here.  Winners still much bigger than our losers. 

The Chaikin system helps overcome even bad swing trading rules!

Our Sector Analysis has confirms the 2 sectors worthy of full-sized bullish trend trades, with reasonable stop losses (3 percent below the 40 day EMA).    The XLK (tech) and XLV (healthcare) meet all of our trend trading criteria, and both are outperforming the SPY --  with a rising Chaikin Trend Line, price above trend and positive money flow.

We entered a trend trade in MSFT (part of the XLK ) at the open today.  Mr. Softy gave a Relative Strength Breakout signal today, met 10 of 10 of our bullish trading criteria, and threw off  a positive 10/40 EMA cross on both the hourly and daily charts.  Earnings are in the rearview mirror and despite a short term run up, we entered, knowing that our risk parameters could endure a slight pullback.   We set our stop 3% below the 40 day EMA at time of purchase and will adjust accordingly. 

Marc Chaikin told us that for anyone who signs up for a  FREE Chaikin Analytics trial  we can release 4 of the stock selections he's made for his 2014 Model Portfolio.  These are 4 of only 20 personal stock picks--companies poised to significantly outperform the S&P 500 this year.   So why not sigh up.

The market continued its aggressive rebound from oversold conditions, but is butting up against the 1800 area as possible resistance.  We completed our weekly Inter-market analysis, adding an important indicator (The ETF "SEA") which tracks companies whose fortunes are affected by changes in dry bulk shipping day rates.  It gives credence to the idea that worldwide economic activity may actually be picking up steam. 

But for now, we remain cautious with index pricing bouncing off lower lowers and are trading short term, half sized long stock positions and credit spreads.  Tech and Healthcare continue to out-perform the greater market, as you can see in our sector analysis  so we're looking for Very Bullish Chaikin Power Gauge Ratings meeting the rules of our trading plan. 

 We continue to watch HSP (Hospira Inc.) which is a medical products company. HSP currently meets 80% of our Chaikin check-list, which is our minimum to trade.  However,  we are waiting for the 10 / 40 EMA cross on the hourly charts before we pull the trigger.   


We did enter a swing trade on the open today.   WDC ( Western Digital Corp.)  WDC gave an Oversold Buy signal on Chaikin Analytics; earnings are in the rearview mirror and we achieved a positive 10 / 40 EMA cross on both the Daily and Hourly charts.    Track all of our trades here. 

Marc Chaikin told us that for anyone who signs up for a  FREE Chaikin Analytics trial  we can release 4 of the stock selections he's made for his 2014 Model Portfolio.  These are 4 of only 20 personal stock picks--companies poised to significantly outperform the S&P 500 this year.   So why not sigh up.

In the video below, we look at a possible trend trade entry for LLY. We're clearly catching the trend about as early as we'd consider for The Chaikin Analytics system.  That boosts the possibility of whipsaw.  But let's face it, we're always evaluating the trade-off between profit potential and confirming signals.  Here, the longer term Chaikin trend has just recently turned up, with price having broken through and now retesting old resistance as possible new support.  In the video below, we show you which Chaikin Power Gauge metrics give us added confidence in this bullish trade idea. 

 Since that recording,  AA and I have studied the price acton and updated our weekly look at intermarket market conditions and added an indicator that boosts our confidence in Thu/Fri's  stock market reversal.  It just may have legs.  More tomorrow.... 

Our systematic review of market trading conditions: caution is in order. Here's where to grab the free trial of Chaikin Analytics.  Here's where to find our trade entries and exits.  And here's the review of market.