In terms of the major averages, we continue to see the a melt up with the S&P 500 and Nasdaq 100 continuing to lead the upside while Micro, Small, and Mid-Caps continue to consolidate in a tight multi-week range. Tech related sectors remain strongest with momentum hitting overbought conditions, whereas other sectors have yet to see momentum break out of its bearish range. Mining and material related sectors remain some of the weakest in the market, while biotech and retail barely bounce as well. I think the healthiest action for this market would be for price to consolidate at current levels with momentum getting into overbought conditions. That we simply continue to grind higher without acknowledging the overhead supply present in so many sector seems like the lower probability outcome, but I’ve been wrong as of late. Until we get an actual pivot high to short against we need to remain patient. To put on swing longs as this point doesn’t present a good risk/reward, so I’d be reducing size and my timeframe to take some “cash-flow” trades until better conditions for swing positions develop.

We got some nice mean reversion across many of the foreign equity market etfs I follow, but many are approaching overhead supply below downward sloping or flat 200 day moving averages. Ireland continues to look like an interesting place to be on the long side if this multi-month consolidation near all-time highs resolves to the upside. Personally, I think what we’ll see across many of these markets is one more high in price while momentum diverges, which I think could provide some nice setups on the short side. India looks like an interesting short setup at current levels.

Interest rates continue to be a no touch, though the 200 day moving average in TLT is slowly beginning to slope downward and momentum remains in a bearish range. A transition to a rising rate environment will take a long time and you will have plenty of time to participate, trust me.

In the commodities and currencies space, the mean reversion we’ve seen play out throughout this year has reset many of the sentiment indicators back to neutral, which has me thinking that we may see a resumption of the primary structural trends in those markets. Sugar seems like the only interesting short setup for this week, the rest of the space I’m watching for setups to develop. EUR/USD is breaking an important trendline, so I’m watching to see if this is the resumption of its structural downtrend.

Overall, I’m remaining patient this week and not overthinking things. I’ve got a busy week ahead with school and other responsibilities, so I probably won’t be trading much, if at all. I didn’t get around to doing individual stock work, but a lot of the same names I mentioned these last two weeks are still in play.

As always, if you have any questions feel free to reach out and I’ll get back to you as soon as I can.

Weekend Thoughts 10/25/15