The Fed changed course, pumping the breaks on " gradual rate increases"  and now offering "flexibility" on the balance sheet.  Mr. Market certainly liked Mr. Powell's words.  The Powerbar Ratio on the SPY has once again turned yellow, with a Bull / Bear ratio of 95:105. (.90)   That said,  when you dig into the market, you see the strength remains in defensive areas.  To that end, in addition to managing our current positions we added 3 defensive sectors to our County; Level 1 holdings.  $XLU, $XLV, $XLRE
Watch our video HERE

Trading Meeting Video Here  After running our weekly top-down analysis to find strength in the market we settled on this trade.  $FITB on addition to being in a strong sector (XLF) and strong subsector (KBE), its Chaikin Analytics attributes checked all our boxes: Very Bullish Power Gauge, recent personality change related to moving average, relative strength and money flow.  Plus, the stock is closer to oversold than overought.   We purchased a long date in the money call, with plans to sell calls against it when the OB/OS oscillator becomes oversold. 

in todays Macro-Monday video we look at which sectors are poised to outperform using the Chaikin Analytics ETF Comparison Tool.  While we continue to see more sectors with improving Power Gauge ratios the strength remains mostly in defensive sectors as seen above in our weekly sector comparison chart.   Following our full Macro-Monday analysis, we add a bullish trade in the XLF via CitiGroup $C.  We added a long call diagonal to our simulated bullish options trades.   A long call diagonal is a two legged trade, with the furthest dated option being the long leg, selling an out of the money call in the front month agains it.  Our hope is to roll the short month a time or two, generating credit to reduce our cost basis in the long dated in the money call option.   See our Monday video, including how we set up our trade in CitiGroup HERE

Today, we made purchases for our ETF portfolio, following our intermediate term trading rules.  Video Here.  Gold, dollar, short duration bond ETF's showed greater strength than most international equity EFT's over the intermediate, 3 - 6 month time frame we trade.  Brazil was the exception and constitutes our largest overall portfolio position. 

What do you think about the move in semiconductors today?  SMH smashed through diagonal resistance, but remains a couple of bucks below some pretty major horizontal resistance.  Money flow has moved to the upside, which suggests institutions are buying.  Here's the Chaikin take on SMH prior to today's price action  (Chaikin Analytics updates prior to the beginning of each trading day). Until this morning, the SMH ETF Power Gauge was neutral and relative strength vs. SPY pretty weak.  The ETF is also overbought and below a falling Chaikin long term trend.   So, how do we trade it?

That's where options come in.  I favor a neutral to bullish strategy using a skewed double calendar.  Yeah, this is deeper-end-of-the-pool-stuff, but it's why having an options education gives you more than just UP/DOWN trading alternatives.  In the case of this trade, here's the set up using the option analysis tool.  It rewards me if price ends up lower or higher than tomorrow's planned entry.

'I'm respecting the fact that price broke out to the upside and institutional money flow supports pushing the stock higher.  However, I think the stock's price advance will get delayed by significant overhead resistance, which is confirmed by an overextended OB/OS Chaikin oscillator.  So may trade leans bullish.   But I give myself a little room for the stock to pull back and retest former resistance as new support before moving higher.  The red lines above and below represent my breakevens on the trade (see below).  As long as price stays within the red lines between now and expiration, I'll make money.  

Of course, I won't be waiting around to see if I make max gain.  All I'm looking for out of this trade is about 10% - 15% return on risk.   I'll buy 7 double calendars at $2.12 per contract.  So my risk is around $1500.   I'll be happy with $200 return in under 60 days.  That means selling when price moves to about $2.40 per contract.  Of course, I'll be paying round trip commissions on a four legged spread.  So, that's $60 round trip.   Still, $140 return on $1500 on risk is my likely upside if all goes well.  Not bad.  But, commissions suck.  What would you do?  In the money diagonal?  Bull put spread? Long call vertical?

The SPY bull / bear ratio retreated after nearly reaching 1.0 off the unprecedented late December lows. Price of the SPY remains up and above the 21 day MA while still below a falling 200 day MA.   The indices remain very overbought, with OB/OS oscillators beginning to point power.   

After a brief tour around the mid-day markets, we turned to managing our long ETF portfolio. Today we are managing our Country 1 & 2 holdings as well as macro etf's.  We will either hold, liquidate half or liquidate 100% of each of our holdings according to our rules. Tomorrow ( Friday) we will determine what ETFs, if any, meet our acquisition rules. 

Watch todays video HERE

Here's a link to this morning's Relative Strength Wednesday trading meeting, powered by Chaikin Analytics.   After bumping up against diagonal resistance under extreme overbought conditions, we expect at least a pause and quite possibly a continued stock market pullback in the coming days.  In the video, we were quite confident the market wouldn't hold its highs  today, and we were proven correct.  Despite the large swing to the upside, the market has not yet put in a higher - high. So, our trend forecast remains neutral with a greater likelihood of downside price action in the near term.   I'm less convinced than AA that we'll retest recent lows.  I see a pullback to a key retracement level.  See the video for more. 

Our relative strength analysis, which includes Chaikin forecasts for the coming 3 to 6 month period along with past one, three and six month return time-frame,s  can be viewed here and below.  In today's video, we explain what the metrics mean.  Bulls should look for stocks in sectors showing green in both forward Power Gauge forecast collums and recent return % columns.  Healthcare, for example, appears poised for a bounce after its recent pullback over the past month.  Bears should fish for stocks in sectors that have been weak and are forecast to remain weak.  Bearish trades in Energy and Materials seem the best bets.   Overall the market may be in transition.   We'll either confirm or negate a Bear Market chart pattern in the coming weeks.   A break through diagonal resistance and a powerbar differential on the SPY above 1.1 would change my market posture from Neutral. 

Our Bull / bear ratio chart shows just how sharply we have have recovered from the December 26th lows.  In that time the bull  / bear ratio has rebounded from .01 on 12/26, to .91 as of today.   Moneyflow has turned positive, however, we remain overbought and price is now outside the upper Vol band.  In todays video we look at not only the overbought nature of all the major indices, but also the oversold positions of GLD, TLT and similar negatively correlated tickers suggesting a pullback or sideways move in the broader market. 

The sector bull / bear ratios are also improving, however they are suggesting a mostly defensive recovery as XLU and XLV remain in among the strongest bull / bear ratios.  Financials had a strong week on the heels of mostly strong earnings.   Visit our Market Conditions page to see all of these metrics updated weekly. 

Also in our meeting today, we examined a possible XLY trade using a long diagonal call spread.  This trade looks to benefit from selling premium against a long-dated in ITM call. 

You can watch todays video HERE

 Here is our Friday trading meeting video  Today we managed our ETF portfolio using Chaikin ETF Power Gauge ratings and 3 - 6 mo. relative strength performance vs. our benchmark ETF, ACWI.   Recent strength in the market has led to a 10-40 day EMA daily cross, which allows us to raise assets under management from a max of 25% of Net Liquidating Value to 50%. 

Got caught with a nasty bug this week, so we weren't able to go through Relative Strength Wednesday.  I posted some data from the Chaikin Analytics app ahead of the Friday trading day.   First, Sector ETF's in descending order by Power Gauge rating, followed by Power Bar differentials and the one-week, one-month, three-month and six-month relative performance vs. the SPY. 

Now, here's the reverse look. Sectors ranked bearishly by Power Gauge.