Prepared by Geoff Bysshe, President of MarketGauge, filling in for Mish until September 4th.
While I'm filling in for Mish you can follow my swing and daytrading in real-time in our trading room (instead of twitter) called "Daytrading with HotScans" here: https://marketgauge.com/?page_id=1232
Candle chart readers will call them bearish engulfing patterns across the equity indexes.
Just days ago I wrote that I was waiting for all the major "market watch" indexes to close under their prior day's low to declare that it's time to stop going up relentlessly. Well, bearish engulfing is not the same, but...
Today's market action reeked like the odor of an apple orchard in late fall where you know the cider will taste good, but the you also know the smell to be that of the end of a season.
There may still be some summer days left, but if you were in the trading room today you know I jumped on the short bandwagon early, and today's list of stocks will reflect a two way market for the first time in a while.
Fortunately for this market, a correction will attract buyers faster than insiders can sell their FB stock so I look forward to any market correction we can find.
I'll be more convinced that the market is ready for a break when we get closes below the prior daily low, but for now the red flag is raised with the DIA closing below its prior day low and the other three experiencing bearish engulfing patterns on a wide range day.
I'd like to hear what you think too!
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S&P 500 (SPY) I don't want to over analyze this. 141 is the big support level. That's what I said yesterday and it's still true.
Russell 2000 (IWM) We followed it up today for a nice trade as planned. Took out some profits and let it come back. It's still in good shape. Let it consolidate as long as it holds 80.50.
Dow (DIA) 133.14 is the 2012 high, and while the SPY broke its high the DIA could not. Then it closed under the prior day low. I'm short. Subs - watch the pivots closely.
NASDAQ 100 (QQQ) The last 3 days form a broadening wedge that is a pattern that rarely ends well for the bulls. 67.85 is the key support and a close below that would be bad.
ETFs:
GLD Big break away gap over the 158 level we've been focused on. Sometimes you miss the worthwhile entries due to gaps like today. Be patient for an entry over 158.
SLV Just like GLD, nice break away gap. The 10 20 and 50 DMA are now ready to catch any retracement. If your long, take some profits against 29. If you're looking to get long wait for the pull back to 28 or 27.50.
XLF (Financials) Was a leader early today boosted by an impressive day by JPM. It pulled back but this is still a place to look for long trades, not short.
IBB (Biotechnology) Nothing remarkable going on here. If the market gets weak, we'll look to see if this group finds buyers.
SMH (Semiconductors) The upside looks great if it can clear 34.00. But until then stay clear.
XRT (Retail) Should hold low at 60.79 or 10-day MA at 60.60.
IYT (Transportation) Stopped dead at the trend line from the 2012 highs I mentioned yesterday. Look for support around 92.
IYR (Real Estate) The key range is 65.30 to 64.15 where a breakout over 65.30 should lead to new highs, but if the general market corrects this has a bearish flag that begins to breakdown at 64.60.
USO (US Oil Fund) Justmissed our target of 36.50 level on the open and then sold off to close on the low of the day. Today's bearish action suggests it needs a rest.
OIH (Oil Services) Held up very well today. As long as it holds over 41 is an area to look for long trades. But beware of XLE, if it's falling wait on your long OIH.
XLE (Energy) Big resistance at 72.77 - 73.00. Draw the resistance line from the July 2011 highs. Bearish engulfing pattern. Look for it to move lower if it trades below 71.88.
TBT (Ultrashort Lehman 20+ Year Treasuries) TLT's are sitting on their 200 DMA with a very interesting reversal pattern over the last 4 days. Expect TBT to head lower.
Longs: On categories: Gap higher days we go to all categories and choose ones with lowest risk that break the opening range. On weaker days, we look at Category 3, especially if the picks hold S1, previous day lows or a major moving average and have a good risk on the reversal. The difference between Category 1 and 2 is the stock condition-a Condition 1 is strongest stock and more likely to make a parabolic move.
Note: Anything that is on this list is a candidate for a swing trade (of course market condition is a factor). Use the max risk mentioned along with an opening range stop along with a fudge factor and time confirm. I suggest you decide on 1 or 2 that have a risk you like and then position size accordingly.
Category 3:(Double Up) Positive Phase, Condition 1 through 4, Positive Pivots which means can either buy a opening range breakout or candidate for Opening Range Reversal, with Risk S1 or previous day low, whichever is lower unless noted differently, Target- Day to at least 3 ATRs from entry:
TGT - Very strong daily and held up very well. 63.65 is a good tight risk level
AMGN Must clear 83.40. Max risk 82.65.
COF Pulled from a very strong morning but still worth looking for a long opportunity over 56.20. Max risk 55.90.
JPM Held its big breakout nicely. Look for opportunities over 37.50 with a max risk of 37.40.
ASML Pulled down with the market, but still well positioned for trades over 58 with a max risk of 57.50.
TSCO Inside day makes for a very tight two day range. If it can head higher it has a clean shot at 100, but it must hold 93. Look for a breakout over the 94.20 area.
CRZO 26.20 could be a big hurdle now but if it breaks over 26 it is an energy stock to consider. Max risk 25.40
CELG Held up great in the weakness. Closed back over the 10 DMA at 71.03. Look support at 70.90 and 70.60 with a max risk of 70.30.
CBST Very tight inside day makes for a nice set up for a breakout over 43.80 with max risk of 43.40.
DTV Still a very nice slingshot 123 pullback with an inside day followed by today's even tighter range. Look for a breakout over 51.70 with a max risk of 51.35.
HSY It had a very nice slingshot 123 pullback and FTP Transition pattern. 72.10 going into today and it held up well. The big picture is the good support level at 71.70. After today's action I'll look for an OR breakout where my stop is below 72.40 and the OR low.
Category 4: (Rip Tide) Oversold (2 or more days under FTP), Condition 4, Needs to clear R1, Risk previous day low unless noted differently, Target- Day to at least 3 ATRs from entry:
ALXN sitting right on the 50 DMA with 2 inside days with yesterday's high of the day at 102.40. Look for a break out over that level. There is good support at 101.00. Max risk 100.23 which is the 50 DMA just below the lows of the last 2 days.
Phase Change:
LLL Had a nice big volume and strong day, closing over the 69.50 I was looking for. Use today's low 69.11 as your risk.
Shorts:
Category 5: Titanic-Bear Phase, Negative pivots, not oversold, Risk R1 or previous day high. Target: Day to swing
CLF Still looks like a short, but look for OR reversal, preferably against the 41.20 area with a risk of 42.00 Max risk is 42.60.
WTW Very tight day with big volume indicates it could break big either way. 50.00 is good risk for entering a short. The engulfing pattern puts 51.42 as the max risk.
COH Looking for an OR reversal where I can include 55.65 in my stop. Max risk is 56.50
AXP Prefer an OR reversal where I can use the max risk of 57.15 in my stop.
Other:
ROST It is still a strong stock with a bearish slingshot reversal pattern and it has a tendency to pull back hard. It didn't break when the market got weak so that is a concern, but I'll still probe from the short side below 70 based on this pattern if the market looks weak.
Best wishes for your trading