Market Insight

FLS Pre-Market Update: Support Must Hold… 05/03/2018

Market Update: Testing Support

In Tuesday’s pre-market update, I said the market action was not impressive. Now, the major indices are getting close to near term support (their 200 DMA lines). If that level holds, the market could bounce back up to the 50 DMA line (near term resistance). On the other hand, if that level breaks, then the next level of support to watch is Feb’s low. Over the past several years, every time the market got in trouble or looked weak, the bulls showed up and defended support. Let’s see if that happens again or if “this time will be different.”

Under the surface, the tape is split. Semiconductor stocks testing support as the SMH is sitting right on its 200 DMA line. On a slightly positive note, it is encouraging to see the small-cap Russell 2000 out-perform its peers on a relative basis. The tape remains very split and “The Next Move Wins”– meaning we either break below support and fall hard, or we rally from here, break above resistance and hit new highs. Until either event occurs, I have to expect this sloppy sideways action to continue as the market pauses to digest its recent 2-year VERY strong rally. Also keep in mind, we still have a slew of earnings that are coming out everyday and tomorrow we have the always fun jobs report. As always, I want to see where the market closes tomorrow and will have a full report for you this weekend.

This is an interesting note from Bloomberg about Central Banks and Inflation: If you are interested, click on the links to read the articles

Inflation problems

Yesterday’s statement from the Federal Reserve accompanying the decision to hold rates included two mentions of the “symmetric” nature of their inflation target, meaning that the bank is not going to panic about reaching its 2 percent target. Across the Atlantic, the European Central Bank is facing a different headache as April inflation showed an unexpected drop in headline consumer-price growth to 1.2 percent, while core inflation dropped to 0.7 percent, the weakest in more than a year.

FLS Portfolio:

The FLS Portfolio added SFLY yesterday when it gapped up on earnings. The stock opened at $90.70 which was above our buy stop of $84.82. Remember, whenever a stock opens above a buy stop, the buy stop becomes a market order and filled at the best possible price. The same is true for when a stock gaps down below a sell stop. This is the second big monster break-away gap for SFLY and it looks like it wants to go much higher from here (notwithstanding short term pullbacks of course). For those of you who want to hedge: Ticker: HDGE is my favorite way to hedge your portfolio. Here is a snapshot of the FLS portfolio as of Wednesday’s close:

Positions:

A. The service owns:
ADBE +99.03%, ISRG +42.42%, SFLY +4.01%

B. The service will exit:
ADBE @ 201.56, ISRG @ 379.77, SFLY @ 88.64

Working Orders:

Order	Symbol	Buy Stop	Sell Stop	% Change
Open	QQQ	164.71	161.36	-2.03%

Disclaimer:

This analysis contains information from resources believed to be reliable but are not guaranteed as to accuracy or wholeness as of the date of this publication. Past performance is not necessarily indicative of future results. There is always a risk of loss in trading and investing. Opinions articulated are subject to change without notice. This analysis and any opinions expressed are intended for educational purposes only and should NOT BE interpreted as a call for engagement in any transaction involving the purchase or sale of any security or investment product or service. The risk of loss in investing and or trading can be substantial, and traders/investors should carefully consider the inherent risks of such an investment in light of their financial condition. The author, firm, associates, or the firm’s clients may have a position in any of the investments mentioned and their positions are subject to change without notice. Any reproduction or retransmission of any portion of this report without the express written consent of 50 Park Investments is strictly prohibited.

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Adam Sarhan

Host Of The #SmartMoneyCircle Podcast, Founder and CEO of 50 Park Investments. Adam provides weekly market updates to ChartYourTrade.com readers. He is a FORBES Contributor and is a frequent guest on all the major financial media outlets.

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