This will be a quick review for IndexSkybox.com readers, but everyone should be aware of some indexes that have triggered some of our upside alerts this morning.
S&P Retail Index (RLX.X)
The RLX.X gave us an upside alert this morning when this index broke above its 200-day MA at 855. Currently, this index is trading at 873 and a session high. In one of our trading scenarios for a strong economy, this was an index we needed to see perform to the upside. If this is one piece of the strong economy puzzle falling into place, then traders need to be aware of strength here.
Securities Broker/Dealer Index (XBD.X)
Late yesterday and then again this morning the XBD.X looked like it was trying to break a downward trend of resistance at the 580 level. Since early this morning, we've seen some selling come into this index and it has pulled back to the 566 level. We'll take note that a level of resistance was violated short-term and this might be a heads-up for traders in the coming session. Why would this index be important in a traders/investors scenario? Is the economy going to be growing down the road and a surge of new investment banking deals taking place? Are the markets headed for better times and trading commissions increase as a result? Now, traders should answer each of the questions with a "YES" and "NO", then build a plan to capitalize on each of these scenarios. What other indexes can you use to help prove (confirm) or disprove your scenarios?
Airlines Index breaking another downward trend
To some trading scenarios, this may be confirmation that the economy is expanding. The "wild card" is oil prices. Lower oil prices lead to lower fuel costs for airline companies. Traders/investors that aren't looking at a chart of crude futures, which have been moving lower, may only be looking at the recent move in airline stocks as a sign of economic strength. We don't know for sure why the airline index and transportation index is surging and that has us very disciplined in how we place our bets. Is the move we've seen the past couple of months in this group "economy related" or "fuel price" related?
Do you see why scenarios are so important?
As you begin testing the scenarios you've written down, what eventually happens? You start uncovering hidden opportunities to profit and AVOID potential disasters. The DISASTERS part of that last statement is where successful traders are born and prosper!