springCan this stock market spring be wound any tighter than it is? After this afternoon’s narrowing range that would be hard to imagine. This is the end of August and the height of vacation’s being taken, so maybe the existing trading range will continue for now. However, it seems unlikely to last much longer.

Even though the broader markets are in a tight range-bound consolidation. There are individual stocks that are moving higher or lower with increasing momentum; a true stock picker's market.

Crude oil pulled back a bit today, which I said was likely in the last update. We also looked at the breakout in the energy sector ETF then.  It also pulled back today, yet that breakout suggests higher prices in that sector and the stocks in it after some consolidation. Energy was the weakest sector today.

The strongest sector was Biotech and we’ll add two stocks to the others mentioned in a prior letter.

Stock Market Trends Sideways and Sideways

8-22-2016 Markets

There isn’t much to say here about the broader markets that haven’t been said already. The current sideways range continues within the existing uptrend. The move to a new high resulted in a pullback, so we have a Pivot High (PH) resistance. The pullback from there resulted in a new higher Pivot Low (PL). Those two reference points mark clear lines for a breakout or a breakdown.

8-22-2016 trends

There were no changes in any of the trends or market internal since the last update. With breadth still near bullish levels, but sentiment at a bearish level, the internals are neutral. Sentiment being bearish the upside is historically  limited. The trend is up, so the odds are that side. Maybe, sentiment has it right this time. We'll see…

This Intra-day Market Spring Cannot get tighter

8-22-2016 Market intra-day

Above are the intraday charts of the broader market ETFs. The downtrend and uptrend lines shown are to point out the tightening stock market spring. It can only get tighter if the market doesn’t open. Trying to trade these with such tight ranges is impossible. I think so. With individual stocks moving, why try?

The Broader Stock Market isn't Moving, but Biotech is

8-22-2016 IBB

The Biotech sector was the best performer today.  The news of Pfizer buying Medivation was an igniter for the sector today, yet many stocks in the sector look much higher on their own.

8-22-2016 PBYI - ALDR

Above are two biotech stocks that had great day today and a good example of how this is a stock picker's market. Both PUMA (PBYI) and ALDER (ALDR) are just clear of all their moving averages, but are not far from any of them. That is a signal of a bottom and that the moves are just getting started.

8-22-2016 CVS

CVS Heath Corp (CVS) is one that I have been watching since it gapped higher earlier this month. Today was a classic shakeout and a variation of a “Money Bar” setup. These setups rarely fail to move higher. It’s a buy with a stop under today’s low.

Summer vacation time is coming to an end and after the coming Labor Day holiday, the markets should be moving. With that said, we’ll see how this week unfolds.

All the best,

Greg Capra
Founder of The Pristine Method of Trading

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