Market Action summary: 8/20/18

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S&P 500 overview:

  • Bears running out of space after 2800 support held.
  • Breadth improving, shown by RSP vs SPY.
  • Transports gaining. Notice $DJT follow-through today after high close on Friday.
  • China progress/impasse the next likely catalyst. Remember 2800 in the event of bad news.
  • Individual stocks w/bullish follow-through potentially best.

Groups in focus:

  • Telecom/media sector to be carved out of Tech sector in late September.
  • Industrials (XLI) leading sector since news of China meeting hit late Wednesday. Watch for $77 breakout.

Don’s watch list:

  • Toll Brothers (TOL)
  • Target (TGT)
  • HP (HPQ)
  • Hibbett Sports (HIBB)

Charts in focus

  • Mexico trade resolution watch:
    • KSU: Strong earnings July 20.
    • EWW, AMX also in play.
  • Industrial pullbacks: UTX, HON, TRN
  • MU near support, w/5-6 weeks til earnings. Chop to $47, then bounce?
  • Consumer staples may run back to 52-week highs: PEP, KO, MDLZ
  • UPS may fill Feb. 1 bearish gap.
  • ZBH health-care pullback after strong earnings.
  • Materials on pullback watch after good earnings: AVY, CLF
  • Banks may accelerate w/KBE coming off 200DMA
  • GLUU potentially breaking out. GPRO on breakout/short-squeeze watch.
  • Watching small health-care pullbacks: VRAY, TRXC, MDGL, VKTX, SAGE, GWPH
  • CYH short-squeeze candidate.

The case against the Greenback

  • @DX has retraced 61.8% of December 2016-January 2018 decline
  • Most bad global data may be priced in now that Turkey downgraded.
  • Next headlines may be positive: NAFTA, China progress.
  • Europe not dead: German IP, Zew, Polish IP, Euro zone GDP.

Following big money: Options & strategists

  • 8/14: PayPal (PYPL) September 90-95 call ratio spread (1×2)
  • 8/16: Bank of America (BAC) call roll: Jan 15 calls → Jan20 20 calls.
  • 8/17: Apple (AAPL): August 215-217.50 winning call spread.
  • 8/17: Pivotal Software (PVTL): Sept 25-29 call spread. (EPS 9/12 pm)
  • 8/17: Gundlach: Potential for short squeeze in Treasury bonds.
  • 8/20: Gap (GPS) 24Aug 31 calls bought for $1.67-1.90
  • 8/20: Delta Air Lines (DAL): Oct 70 calls bought for $1.35 near highs.
  • 8/20: Atlassian (TEAM): Dec 90 calls → Jan 100
  • 8/20: Cowen, BAML: Fares, demand positive for airlines.
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David Russell is VP of Content Strategy at TradeStation. Drawing on nearly two decades of experience as a financial journalist and analyst, his background includes equities, emerging markets, fixed-income and derivatives. He previously worked at Bloomberg News, CNBC and E*TRADE Financial. Russell systematically reviews countless global financial headlines and indicators in search of broad tradable trends that present opportunities repeatedly over time. Customers can expect him to keep them appraised of sector leadership, relative strength and the big stories – especially those overlooked by other commentators. He’s also a big fan of generating leverage with options to limit capital at risk.