*Click any chart to enlarge. Please read disclosures at the bottom of this page.
All charts courtesy of TradingView.
It was a record-breaking week for the stock market as both the S&P 500 and Nasdaq [insert random narrative that you can read on a thousand other sites].
But we’re here to look at price and volume in the form of charts. So let’s get right to them shall we?
S&P 500 Index (SPX)
The SPX succeeded in its ongoing quest to exercise the Ghost of Christmas Past by closing at new all-time highs on Friday with a nice last minute push.
This just confirms what we’ve been saying for the last couple of months - despite the low volume, despite the doomsayers, the trend has been, and continues to be, up.
The SPX is still technically in a small base here and I’d like to see it stay in that range for at least one more week before attempting to go higher, but the market doesn’t care what I think.
NASDAQ-100 Index (NDX)
The NDX has been ahead of all the other indexes during this run and nothing changed this week as it closed decisively above its old all-time highs.
Dow Jones Industrial Average (DJIA)
The Dow slipped a bit this week, but since it’s not a broad based index, it’s not as concerning. And it’s still only about 1% from ATHs.
Russell 2000 ETF (IWM)
As regular Lund Loop readers know, the Russell has been my concern during this run because it’s one of the broadest indexes and it hasn’t been participating like the others.
Though it still has not gotten back above the minor overhead resistance, it’s above all the major moving averages, has been putting in some constructive price action, and sure looks like it is setting up to break out.
S&P 500 Volatility Index (VIX)
Last week the VIX printed a reversal candle on support - which was not unexpected. Since then it has meandered higher, forming a bearish, not quite but close to flag pattern. I’d like to see it break down out of that flag and below support in conjunction with the major indexes moving higher.
Financial Sector SPDR (XLF)
The financials usually lead the market higher, so XLF breaking above major resistance on a clean, full green candle is good for the bulls.
SPDR S&P Homebuilders ETF (XHB)
The XHB came back in a bit, closing below a resistance level. It’s not troubling at this point because it closed above the short-term (21-day) moving average and was due for a rest after that nice move out of the channel in late March.
VanEck Vectors Semiconductor ETF (SMH)
The SMH rested this week, as well it should, after a monster run. It held at support, and printed a reversal hammer off the short-term moving average. Nothing to be concerned about currently.
SPDR Gold Trust (GLD)
GLD tried a small countertrend rally this week, closing back above minor support. The trend though is still down as it is below the 21, 50, and 100-day moving averages. That trend would change if it breaks above the downsloping trendline.
West Texas Oil (WTIC)
Oil tried to break out this week, and failed right below a trendline and the 21-day moving average. It’s too early to tell if this is the beginning of a trend change but breakout failures often lead to significant moves in the opposite direction. We’ll keep an eye on this.
ETFMG Alternative Harvest ETF (MJ)
From last week’s newsletter;
Got some mixed signals in this marijuana ETF. I see both a rounding top (bearish) and a downward sloping channel (bullish if breaks out of it).
It looks as if those mixed signals are starting to be resolved as price broke out from the downward sloping channel - though not convincingly enough for my money.
Bitcoin attempted to break out of a range but ended up coming right back into it. Nothing to see here yet.
The S&P 500 and Nasdaq Composite closed at new all-time highs, with the Dow finishing the week slightly negative and 1% below its best-ever close.
230 S&P 500 have now reported Q1 2019 earnings, and the reported EPS growth rate for the index is up to +2.01%
U.S. Q1 GDP surprised to the upside, exceeding expectations on stronger net export contributions, though personal consumption growth slowed.
Housing data was mixed; existing-home sales declined 4.9% month over month, but new-home sales were up +4.5% month over month and hit their second-highest level this cycle.
The best asset class returns this week were US Mid Caps (+2.46%) and the worst were Emerging Markets (-1.48%).
Potential market moving data next week: FOMC meeting announcement (Wed) and U.S. employment situation (Fri).
*Click any chart to enlarge. Please read the disclosures at the bottom of this page.
All charts courtesy of TradingView.
As always, before we get into this week’s setups, let’s take a look at the highlights from last week’s Lund Loop.
We had three stocks that triggered but came back to their breakout points for scratches (USO, NOC, and FSLR) and one that didn’t trigger (UPS).
Here’s what the rest did.
After breaking above resistance, NTES has formed an orderly flag pattern on decreasing volume. Watch for a break out of this pattern.
Break out it did for a 5.53% gain.
Anglogold Ashanti (AU)
We have been watching this AU short setup for three weeks now, and it finally triggered for a 3.21% move.
It has consolidated in a tight range providing an opportunity for another short setup if it continues to break down.
KSS was a short setup that made a nice 4.15% move on Monday. Then on Tuesday it gapped up big on news that the company was partnering with Amazon on something or other.
If you weren’t day trading this you got burned. What can you do to protect yourself from these types of situations? Nothing. It’s part of the trading game. Take your loss and move on.
Constellation Brands (STZ)
STZ was a pick from two-weeks back and it’s up 11.5% since.
Now on to this week’s setups. And as always, during earnings season make sure you know when stocks announce before you trade them.
Acadia Pharmaceuticals (ACAD)
Regeneron Pharmaceuticals (REGN)
If you look at these three charts, you’ll see that they all have similar patterns - as do many stocks in the pharma space currently. The pattern is basically a bear flag. But if you were going to trade one, which would be the better setup?
ACAD would not be the optimal choice because it is still above the 100 and 200-day moving averages which means it is showing good relative strength, making a short play much tougher.
REGN would be a better choice as it’s below all major moving averages, but not a good choice because even if it breaks out of the flag, it will still be above a pretty solid resistance level that could halt downward movement.
The answer then is PFE because it is below all major moving averages, and if it breaks out of the flag, will also be breaking below a support level.
If CRM breaks out of this range, on a measured move, the upside target would be about $179 and change.
EFX has made a nice run and formed a small bull flag on declining volume that paused right at the 21-day moving average, setting up a good risk/reward entry point.
VF Corp (VFC)
A similar pattern except VFC has formed its bull flag right below all-time highs.
Lyft Inc (LYFT)
For the last few weeks, traders and investors have been falling all over themselves trying to catch a move in the Lyft IPO. But they would have been wise to have some patience and wait until there was a clear setup - like we have now.
LYFT has broken a downtrend line and printed a reversal hammer right at a level where support has held three times previous. This is as clear as a setup can get. You’ll have a $3 risk by buying the break of the top of the hammer and placing a stop below the tail
Don’t know anything about this company, but the chart looks poised for some upside if it breaks that downtrend line. This would definitely be a longer-term trade with a measured move target of $72-ish - though it would probably take awhile to get there.
Hey look, everybody’s favorite stock to love/hate.
We’ve been watching TSLA for a while now, noting that it’s really just been in a large range for the past two years. Well, this week that range was broken to the downside.
If I was bearish on TSLA, I’d like to see some consolidation in that square area on the chart - ideally in the form of a bear flag - and then I’d short the breakdown out of that consolidation.
The Illusion of Control
Over the last 32 years I’ve met and spoken with thousands of traders. And over that time I’ve placed tens of thousands of trades myself.
And here’s one thing I’ve learned: Trading is fucking hard.
It’s hard because everything about it goes against what human beings seek most - control, validation, and lack of discomfort.
It’s almost as if a group of evil scientists wanted to create an activity designed to hollow out the core of one’s ego and self-worth and they came up with trading.
Take for example a buddy of mine, who is a relatively new trader.
He’s been getting beaten up by the market this year and it’s taking a physical and mental toll on him. It seems like every time he puts on a position, it immediately moves against him.
Then when he closes the position, it moves right back in his original direction.
He is so stressed out I honestly don’t know how much more of this he can take.
Oh, did I mention that he’s up $260k so far this year? And banked $1.5 million last year.
Yes, I too agree that he deserves to be beaten senseless.
He is doing better than 99.99% of traders will ever do, he is young, single, and has the financial freedom to live his life as he chooses - yet he is miserable.
Because he is chasing something that doesn’t exist - perfection, which is really just a desire for control.
He is always talking about how much he left on the table by selling this position too soon. Or how much he would have made if he’d just pulled the trigger and bought that position.
And he’s losing a lot. A lot more than he’s winning. And he doesn’t like it. Even though he’s killing it financially.
But that is the nature of trading. You lose. A lot. You’re supposed to lose a lot. Even if you are making money, you will lose way more times than you’ll win. Those are the ground rules.
If you can’t accept that, it’s like playing Monopoly using Stratego rules - you’ll never win and you’ll get screwed up in the process. (Sorry, old[er] guy board game reference. Google them).
Losing on a trade is something we can’t control. And that often reinforces the lack of control we have in our lives in general. And If you’re always reacting to losing in order to try to regain control, validate yourself, and end discomfort, you’ll drive yourself crazy.
And you’ll eventually lose everything. I’ve seen it happen more times than I care to remember.
It almost happened to me.
So if you are struggling with trading, instead of changing brokers, platforms, or styles, take a hard look at yourself and see if there isn’t some non-trading issue that’s affecting your trading.
If you don’t have any experience doing that, or aren’t good at it - and who is - get someone who can help you do it. A mentor. A coach. Or better yet, a therapist.
Control is an illusion.
The only thing we have a say in is how we react - in both markets and life. And if you get a handle on that, you’ll be surprised at how much better you’ll feel about your trading.
Trading & Market Links:
The irony gods are working overtime. This week the Naz hit all-time highs, but nineteen weeks ago it had its worst week ever. (The Irrelevant Investor)
I haven’t traded an odd lot in 20 years. Apparently some people still do, but they won’t be able to much longer. (Bloomberg)
Investors like stories. Here’s why. (Behavioural Investment)
MSFT hit all-time highs this week so that dorky Steve Ballmer gif made the rounds.
Is Bitcoin tulip mania or the internet? (New York Times)
Why don’t we teach personal finance in school? Because our school system is based upon an 1852 model. (A Teachable Moment)
Why are energy stocks and oil prices out of sync? (Koyfin)
More trader advice from some loudmouth.
When everybody was gaming who’d be a trillion dollar company, very few people picked Microsoft. (The Verge)
Will the fantasy of hedge fund outperformance ever die? (Bloomberg)
To learn more about trading, check out my post 20 Books Every Trader Should Read.
When I go to bed at night, there are several things on the nightstand beside me: a Google Home mini, flashlight, CPAP, two bottles of water, a key fob for our alarm system, and a gun.
I wish I didn’t need that last item, but I do. I think.
It’s a funny story.
Coming of age in the 80s you’d think I had a lot of exposure to drugs. But I didn’t. I never saw them.
I knew they were around, but they weren’t a part of my world, so I developed a blind spot for drug use.
How blind? Pretty blind.
On a trip to Vegas with my best friend in the early 90s, I thought it was odd that there was a FedEx envelope waiting for him when we checked in, but I never suspected it was filled with ecstasy, sent by his friendly – and enterprising – drug dealer.
And the 30 minutes he spent locked in the bathroom before going out for the night? I assumed he was prepping to look good for the ladies, not snorting blow off the countertop.
His drug abuse continued for years, right under my nose, because I wasn’t looking for it. Only after he got sober did I realize how serious a problem he had.
As I got older, pragmatism forced me to look for the footprints of drug use in certain situations, like when interviewing potential employees for my business.
If they exhibited the trifecta of pinpoint pupils, face picking, and sweating on a cold day, I had to pass – as my underwriters were a bit touchy when it came to meth addicts operating heavy machinery.
Yet, outside of these narrow situations, I was still blind without a cane when it came to spotting drug use.
I was similarly naive when it came to guns.
My parents didn’t own guns. Neither did my friend’s parents. Nor was there much wild game in Huntington Beach, which meant I didn’t even have a local hunting culture for reference.
Growing up, I only had two first-hand experiences with guns.
One was a BB gun. It was my dad’s when he was a kid, and my buddies and I would take it on the side yard of my house and shoot tin cans off the fence – and possibly a cat or two.
Don’t worry; it wasn’t as cruel as it seems.
This gun wasn’t the cool pump action type where you could pump it way beyond the manufacturer's suggested number of pumps, compressing the barrel with so much air the BB would go through an engine block.
Instead, it had a slide which you could pump one time, ejecting the BB in a weak, Randy West like fashion. If we were even lucky enough hit a cat it would barely break stride long enough to give us an annoyed look.
My second experience was in Australia. My friends and I met up with some locals we knew and went on an overnight camping trip to Wollongong, or Mittagong, or Dingoville – some Aussie sounding town – where we road dirt bikes deep into the forest.
After playing “Captain Puff” – an Australian drinking game, not a Deliverance inspired act – for hours on end, one of the Diggers pulled out a .22 rifle he’d brought along and asked us if we wanted to “throw some bullets on the barbie?” – or something to that effect.
Everyone knows that alcohol and guns mix, so we said “sure.”
I watched what those before me did, and when it was my turn, I grabbed the rifle like I’d been born with a gun in my hand, cocked the handle thingy, pointed and shot.
“Ptttt, ptttt, ptttt”
It made such a weak, unthreatening sound I wondered what all the fuss was about, and after five or six shots I lost interest and went back to downing cans of lukewarm Victoria Bitter.
It never occurred to me, then or after, that two things I had so little experience with – drugs and guns – would eventually intersect in my life.
About 15 years ago, for reasons that are both uninteresting and irrelevant to this story, my mother-in-law suddenly found herself living alone in her large house.
Getting on in years, my wife’s family thought it best if somebody moved in with her – at least temporarily. Since my wife and I were the most geographically convenient, we became that somebody.
I was okay with it. I liked my mother-in-law as well as her house, and we had entertained the thought of taking it over someday anyway. The only problem was that moving in with her came with a catch – my brother-in-law Gary
A serial ne’er-do-well, he had a long history of going in and out of jail on various petty crimes and drug offenses. When we moved in, he was serving time, and I assumed that once he got out, he’d disappear as he’d done in the past.
Anyway, he was a grown man and not my problem. Or so I thought.
A few years went by, and two things happened; we had our first child, and my brother-in-law got out. But this time, he showed up at the house, and suddenly he was my problem.
My mother-in-law, bless her heart, has an unlimited supply of hope when it comes to her kids. That’s a good thing when you hope that they graduate college, get a good job, marry a loving spouse, and so on.
It’s not such a good thing when they’re a drug addict, and you hope this time is different.
With that philosophy unshakingly in place, she offered Gary his old room.
I was not down with this at all. If it had just been my wife and me, I probably would have been okay with it. But it was different now. I had a child.
Unfortunately, not my house, not my call. We could have moved out, but I was stubborn. Why should the person who does everything by the book be put out by the habitual rule breaker? I thought. Besides, the plan was for the house to be ours eventually, and I wasn’t about to move out of my own future home.
Like an alcoholic who swears the morning after an all-nighter that he’ll never drink again, Gary was in his post-incarceration honeymoon period, proclaiming that he had changed and would be staying on the straight and narrow from here on out.
I wasn’t buying it.
For a while, everything was good. Then it went bad.
Things started mysteriously disappearing around the house. But only things that had value at pawn shops. Books, lamps, and dishes were safe, but digital cameras, gold jewelry, and electronics were like endangered species. (Insert “Hmm” emoji here)
Then my mother-in-law’s credit card went missing. She insisted she misplaced it, but the charges that kept popping up on it at local electronics stores argued otherwise.
Things came to a head when everyone except Gary went out of town for a family event, and upon return, we found Gary, my in-law's mini-van, various pawnable items - and a glass beer pitcher I kept on my desk - gone.
The beer pitcher upset me the most. It had about six-hundred bucks in it, but I didn’t care about the money.
Upon learning my wife was pregnant, I started throwing extra change and bills into it as a sort of college savings fund. When my daughter was born, we created a real savings fund in the form of a 529b plan, but I continued “contributing” to the pitcher as both a tangible and sentimental reminder of my fatherhood.
And that fucker stole it.
A week later the van turned up, totaled, by the side of the freeway. Gary had “sold” it to a homeless couple, with - and I know I’m going out on a limb here - their own set of issues, as they were found wandering on the median, yelling at cars, and reeking of alcohol.
He’d gotten $500 for it.
Gary pulled his disappearing act for about a year until he finally turned up, this time in the real big house, state prison. I was glad and looked forward to being unburdened by him for 5 to 10 – depending on good behavior. But alas, his crime once again was petty, and he was out in 18 months.
However, this time he didn’t come right back home. He went to a halfway house instead, enrolling in a court-ordered substance abuse program, complete with mentor and counseling sessions. And six month later, when he once again darkened our door, I thought there was a chance he’d got his shit together.
Actions speak louder than words, and for a while, Gary’s actions trued up with his “never again” rhetoric. He kept regular hours, attended support meetings, and got a job washing dishes at a bar around the corner.
Right around this time, a few things happened. My mother-in-law moved out of state to take care of an even more elderly relative, we had our second child, and my wife and I started the process of making the house officially ours.
Gary was still there but seemed to have turned a corner, so we let him stay. Still, I kept my eyes on him. The blind ones.
One day, while looking for something in my mother-in-law’s potting shed, I lifted a box and found a ceramic pipe, with what looked like some charred resin in the bowl. (Druggie lingo, pretty cool huh?)
Knowing my mother-in-law only shot heroin, I figured it wasn’t hers, so I ran up to Gary’s bedroom, kicked open the door, and began rifling through his dresser drawers, where I found about twenty plastic tubes, each filled with what I knew from watching bad 70’s cop shows was pot.
“That son of a bitch,” I thought to myself.
I was livid and ran downstairs to show my wife, who began with, “why did you go into his room?” Don’t even get me started on that one.
After screaming and yelling for what seemed like an hour, I walked out into the backyard to calm down.
I’m a purist when it comes to writing. I like to paint pictures with words instead of using pictures themselves. But I’m gonna break my own rule this time in order to give you the fullest understanding of what happened next.
This is the view looking out from my living room to the yard. You’ll notice a long wood table just outside the double doors. That table is exactly where it was when I went outside to cool down. Except, on that day, it had a lot of small potted plants on it, legacies from my mother-in-law’s green thumb.
Or so I thought.
I paced back and forth and around that table for about 10 minutes, trying to figure out what to do. Then I stopped and sat on top of it, at the far end. As I kept thinking, I casually glanced down the length of the table, noticing that a few of the plants had a small plastic naming stake stuck in their soil.
I read the one closest to me out loud.
Then the next one.
I suddenly heard the voice of Sgt. Joe Friday yelling in my head, “it’s pot, weed, grass, reefer, Mary Jane,” which was followed by “you idiot!”
In a state of utter disbelief that Gary had the balls to grow weed in my backyard and that I had walked by it probably hundreds of times without noticing, I quickly snapped photos of the plants and texted them to members of the tech team at the startup where I worked.
“They’re Millennials,” I thought. “They can verify if this is really pot.”
The responses I got didn’t make sense, as everybody – rightly so – thought I was joking. I finally had to call one of them directly.
“Adam,” I said. “Are these pot plants?”
“You’re kidding right?” he replied.
“No, I’m dead serious. I don’t know.”
He must have sensed the tension in my voice because his tone got more serious as he confirmed that “yes,” they were. It wasn’t until he got off the phone that - or so I was later told - he and the rest of the team burst out in laughter at my naivete.
At this point, if there were any flammable chemicals around, my head would have ignited them because I was on fire. I ran back to the potting shed and started tearing it apart. What I found only increased my cranial temperature.
Big Bud Advanced Liquid Nutrients. Earth Juice. Reefer Grow. Top Crop (Organic).
The shed was full of fertilizers, chemicals, and nutrients all designed specifically for growing pot. I also found a pair of magnifying goggles, which even I knew – from my visit to Amsterdam – were used to examine the quality of THC crystals on leaves and buds.
“I’m going to kill him,” I said to my wife, showing her the current crop growing on the table. “He has until Friday to get out or I’m going to throw all his stuff in the yard,” I threatened.
And then, just as I was about to go back inside, something caught my eye. The potted plants - actually, more like small trees - that were lining the edge of our patio.
“You’ve got to be fucking kidding me?” I said to nobody in particular. “How could I have missed all this?”
Simple. I wasn’t looking for it.
At his core, Gary was a good guy. I liked that guy. I really did. And though I knew he would never intentionally do something to hurt my family or me, I had to kick him out, because that Gary didn’t exist anymore.
He’d been replaced - a long time ago - by someone else. Someone who smoked meth and sold pot in between shifts to patrons and employees of the bar where he worked. Someone who made bad decisions.
And it wasn’t Gary from whom I needed to protect my family. It was the potential consequences of the bad decisions he’d made that I was worried about.
What if he screwed somebody in a deal and they decided to come looking for him for payback?
What if some of his drug addict friends needed money and figured they’d break into “his” house and rip him off?
What if the police got a tip that he was dealing and busted the door down in the middle of the night?
Or what if his plantation of weed was discovered and we lost the house due to some drug seizure law? (This was in pre-California legalization days).
So, I got a gun.
A Glock 17 with two 10-round clips, you know, just in case Soviet paratroopers were to invade. I’ve seen Red Dawn.
It’s been a few years now since I gave Gary the boot and there haven’t been any problems. He has continued to bounce in and out of jail, but knows he’s not welcome in our home, and has stayed away.
And despite a thorough cleaning and two new coats of paint, on hot summer days when the door and windows are closed, you can still smell the scent of skunk in his old room.
So, every night the gun sits on the nightstand, and every morning, it goes back in a lockbox.
Do I feel safer? Sort of.
Do I feel safe? Not completely.
I never wanted a gun, but I weighed the math of having a gun in a house with children, against the math of being completely defenseless against a couple of meth heads - and the gun won.
What do you think? Did I make the right decision? What would you have done?
Let me know by dropping me a note.
It’s Good, It’s Good
The birth of Monty Python. (The Daily Beast)
Sometimes the best, most moving pieces are the simplest. [Note to self: Remember that] (The Wall Street Journal)
How podcasting became a big business. (Barron’s)
Ugh. I hate superhero movies. But ‘Endgame’ is so popular movie theaters are staying open 24/7 to show it. (WSJ)
The story behind baseball’s weirdest pitch. (Literary Hub)
New details about the night John Belushi died. (The Hollywood Reporter)
[Second note to self: Get this book] (Amazon)
How to reduce digital distractions. Advice from medieval monks. (Aeon)
Building a bridge in 72 hours - video. (Vimeo)
From the vault: How to Bring a Loved One Back From the Dead. (The Lund Loop)
One last thing before you go. If you found any of this week’s Lund Loop valuable and/or entertaining, consider becoming a paid subscriber to get it delivered to your inbox every weekend – not just the last Saturday of the month.
Thanks for reading this week’s edition of The Lund Loop.
I want to hear your opinion on these, or any other topics you see fit to pontificate on.
So drop me a line.
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Talk to you soon,
P.S. It should go without saying - but I’ll say it anyway - all opinions expressed here in The Lund Loop are my own personally and don’t reflect the views of my employer, any associated entities, or other organizations I’m associated with.
Nothing written, expressed, or implied here should be looked at as investment advice or an admonition to buy, sell, or trade any security or financial instrument. As always, do your own diligence.