• Daily Game Plan – Small Cap Leadership

    by  • September 24, 2013 1:51 pm • Broad Market Analysis, Bryan Sapp’s Daily Game Plan, Charts to Watch • 8 Comments

    MARKET CHECK

    Markets have shaken off yesterday’s weakness, and are currently trading near their highs of the session.  This morning saw some weakness in the indexes, but the dip was bought.  The story continues to be how relatively strong small-cap stocks have been, as the Russell 2000 is  again making new all-time highs today despite some lag in other indexes.  For the day, the Russell 2000 is leading, higher by nearly 1% on the session.  The Dow is today’s relative laggard, up a paltry 0.2%.  Despite the bid in stocks, other asset classes are seeing money flow as well.  Bonds are up sharply today, about 0.8% above yesterday’s closing price.  Metals are fairly strong as well, as silver is up near 1% for the session, and gold is 0.1% higher.

     

    CHART OF THE DAY

    Barrick Gold (ABX) – The miner has been relatively weak this year, but there are some signs of life.  In fact, the shares have made a series of higher highs and higher lows since July, indicating that a potential trend reversal is in place.  ABX has been guided by its 50-day moving average for some time, and the shares are now pulling back to that upsloping trendline.  This could be an indication of support going forward, and offers a nice low-risk entry from the long side.  Sentiment toward the equity is currently very bearish.  In fact, option sentiment is currently at the most bearish level seen over the course of the past 52 weeks.  Should ABX gain some footing here, this creates the potential for a bullish unwinding of these bets.

    I like a long entry here with a stop on a close below 18.  I would initially target a move to 20, with 22 as a stretch target.

    courtesy of stockcharts.com

     

    WHAT I’M EXPECTING

    Bulls held their ground today, and I’m looking for a move back to the recent all-time highs on the S&P 500.  The trend remains intact, and we appear ready to make new highs.  The risk to the market right now is the upcoming debt ceiling debate in the U.S., which is set to crescendo on October 1.  Keep an eye on any developments on that front.

     

    About

    Bryan Sapp is a Senior Trading Analyst at Schaeffer’s Investment Research, where he has specialized in volatility-based options trading since early 2010. With Bryan at the helm, Schaeffer’s Volatility Trader generated a 2012 portfolio return of 70% for subscribers. This real-time option recommendation service exclusively trades short-term straddles. Prior to joining the research team at Schaeffer’s, Bryan honed his skills as a speculator by trading his own account, and playing poker professionally to pay his way through college. Bryan attended the University of Louisville, where he received his Bachelors in Economics and an MBA with an Entrepreneurship focus.

    http://www.schaeffersresearch.com/

    8 Responses to Daily Game Plan – Small Cap Leadership

    1. StockGuy
      September 24, 2013 8:21 pm at 8:21 pm

      Actually, I think Bryan’s record is spot on. He has pointed out a number of great trades for me! Also, he doesn’t work for Zacks.

      • Brysapp
        September 25, 2013 2:12 pm at 2:12 pm

        Thanks for the kind words!

    2. paulliu9
      September 24, 2013 8:05 pm at 8:05 pm

      Bryan’s recent record is not good.

      • Brysapp
        September 25, 2013 2:12 pm at 2:12 pm

        I’ve had winners and losers lately, as has everyone. I don’t expect my win rate to be sky high, but I always tilt the risk/reward tradeoff at 1/3 or more. In doing so, you can have a win rate much less than 50% and still be profitable. Also, these are merely trade ideas and I don’t take every single setup that I post here. Having to come up with a new idea for an actionable swing trade every single day can be challenging.

    3. mre2000
      September 24, 2013 5:30 pm at 5:30 pm

      This is exactly why I don’t subscribe to Zacks. Markets closed lower today, S&P below 1700, bulls did not hold their own. Divergence on S&P MACD, debt ceiling and ACA fights in Washington, volatility starting to come back, Zacks expecting new highs. The dip was bought and the pop was sold. Why you are expecting new highs is beyond me, I’m getting tired of listening to all the Zacks permabulls. WHATS THE CATALYST

      • Brysapp
        September 25, 2013 2:09 pm at 2:09 pm

        You don’t need a catalyst when the trend is strong in one direction. Until there is a significant change in the current landscape, there’s not much reason to be making big bets against the market. I do take the occasional bear setup,but we’ve been trending straight up since ’09. I’m not in the business of picking tops or bottoms – all you can do is take the highest probability setups and manage risk.

        • mre2000
          September 25, 2013 3:53 pm at 3:53 pm

          well with all due respect, bad news is bad news again. 5 down days in a row now. And while you acknowledge the problems in washington, which part of this market is telling you “we appear ready to make new highs”? S&P is 40 points above its major trend line, more than 100 pts above the 200dma, divergences and non confirmations everywhere. Holiday hiring is below last years levels, Q3 revenue and earnings estimates are coming down and probably going to stink, I just don’t see what you’re seeing. That doesn’t mean we won’t go up, I’m just skeptical about taking out the highs. I’m sure well bounce big into a govt budget / debt deal, which I’ll be fading all the way. You and Reitmeister can tell everyone to buy buy buy. lol GL

          • Brysapp
            September 25, 2013 3:55 pm at 3:55 pm

            We’re 2% off all-time highs and everyone hates the market. Line in the sand is 1680 – below there I’ll get more cautious.

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