1. Several readers requested an updated read on Chevron (CVX) and Exxon (XOM), but unfortunately I don't believe any new or material information (be it technical or fundamental) has hit the market since we last reviewed these names in the Aug. 3 Trader's Notebook. I expect to own these names at some point, but as we've discussed in past reports, neither stock has declined to the degree they did in prior prolonged bear trends. The higher timeframe trend remains bearish, and given the bearish forward price curve in crude oil, I can't see stepping in front of sellers at this juncture.
2. We began the week looking for a short entry in the iShares 20+ Year Treasury Bond ETF (TLT), but as anyone trading bonds already knows, bonds have remained impressively strong. The $125.71 level was referenced in the Aug. 17 Trader's Notebook, and that's still a major reference point on my sheets. That said, I'll likely lay off stalking intraday short in bonds above $126.44. Once the TLT is closing above that level, I'll wait for a close back under the 150-day and 200-day simple moving averages before revisiting the short side.
3. The bears went after a number of the market's generals on Thursday. Bids began to vanish on Netflix (NFLX), Action Alerts PLUS portfolio holding Facebook (FB) and Growth Seeker portfolio stock Amazon.com (AMZN). But what about the defense stocks? Stocks like Northrop Grumman (NOC), General Dynamics (GD) and Dividend Stock Adviser portfolio's Lockheed Martin (LMT) have been on tear in recent months.
But NOC in particular looks ready to fall back to earth. We don't have the same sort of bearish candlesticks we had on recent Trader Notebook short-side pick Starbucks (SBUX). But what we do have is declining momentum in the form of negative divergences in the Relative Strength Index (RSI), and an obvious difficulty pushing beyond $176.5-$177.
My thought here is pretty simple. Intermediate timeframe traders comfortable trading on the short side might consider selling NOC near current levels ($172.59 as of Thursday's close) with a protective stop on close above $177. An initial target would be the 50-day SMA.
Any trading or volume profile related questions can be posted in the comments section below, emailed to me at firstname.lastname@example.org or posted to my twitter feed @ByrneRWS.