hunting for opportunity amongst the chop

$SPY ended flat this week, closing up just 11 basis points from last Friday’s close. Despite the seemingly quiet week we actually had a large travel range from an early dip below 208 on Monday to a sharp bounce above 212 into Thursday and then gave up half of that rebound on Friday to end us once again in the dead center of our 208 to 212.50 range. There’s no use over analyzing a choppy range bound market so until we see our intermediate levels broken, the market is sure to thrash around frustrating the majority. During times of chop I’m more interested in analyzing the market internals and leading (lagging) sectors to find pockets of opportunity. Below we’ll analyze some of those more interesting sectors.

$IWM the small caps continue to trade with a more bullish tone as they hang out near their all time highs around 126.50. They finished up 42 basis points on the week and it’s this index we’ll want to pay attention to next week to see if they can blaze the trail to new all time highs. If we can get a new closing high next week it would certainly reinforce to me that we should be looking at the overall market environment with a glass half full mindset and perhaps the $QQQ and $SPY will play catch-up. On the other hand if we fail at highs and roll over, then it would seem there’s more of this same chop and uncertainty ahead.

$IBB biotech is once again trying to resume it’s leadership role in this bull market. We’re close to all time highs and we’ve been neatly consolidating right underneath resistance for over 3 weeks now. Similar to the $IWM I will be watching this leading index to help give me more context when analyzing the broader indices.

$XLF another recent leading sector are the financials. We’ve broken above all near-term resistance levels and closed the week out at new 7 year highs. Traditionally, we’ve been led to believe when financials lead, it is indicative of healthy bullish behavior in the general market. I don’t know whether statistics support that claim or not, but I do know this is the sector I would look to have exposure in.

$AAPL suddenly isn’t looking so hot. The reversal bar on Thursday off of that overhead 130 resistance level saw some downside follow-through on Friday and closed the day on the lows. Objectively, we’re still in this prolonged consolidation pattern but the action in the near term certainly favors the bears. The rising trend-line that has been in place since March will be an interesting inflection point to monitor if we do see continuation lower next week. 126 – 130 is the immediate risk range to watch.

$AMZN here’s a name that continues to quietly trade within a tight range holding above a 30 point open upside gap. I like the tightness we’re building here and I think a breakout above 436 or a breakdown below 420 offers an attractive trade setup. Seems like it should be ready to make a move within a few days time. On watch.