Prepared by Geoff Bysshe, President of MarketGauge, filling in for Mish for Until December 13th.
Better than expected jobs data led to a gap higher, but worse than expected sentiment data, Fiscal Cliff banter, and AAPL made it difficult for stocks to hold onto their opening prices. The daily consolidation patterns around the 50 day moving average define the levels to watch in each index. The markets are neatly in sync. Each index is in a slightly different position relative to their consolidation's key levels. One thing they all had in common on Friday - very low volume.
3 of the 4 indexes are acting constructively. The QQQ, however, is struggling under the pressure of the negative slope on the 50 DMA and the inflection point of its 200 DMA which are both right over head. Plus, Friday's miserable performance can't just be blamed on one bad AAPL. In addition to AAPL's 2.6% decline, four more of the top 10 holdings in the QQQ were down at least .5% (GOOG, MSFT, CSCO, QCOM).
S&P 500 (SPY) First close over the 50 DMA since late October puts it an unconfirmed bull phase. Let's see if it can clear last week's high of 142.92. Look for support at 142.16 - 142.00. Subs: Positive Pivots
Russell 2000 (IWM) Still dancing on the 50 DMA. Has to get above 82.80 to make the 50 DMA a distant memory. On a positive note, the 10 DMA has now crossed the 50 DMA for the first time since late Oct. Subs: Pivots Positive
Dow (DIA) Broke out of consolidation and closed both over the 50 DMA and on the highs of the day. Clearly the strongest of the 4 on Friday, and more importantly, many of its bigger components have constructive bases that would support substantial moves higher. This makes this the index one to favor on the long side going into year end. Look for support at Friday's lows and resistance at 133. Subs: Pivots Positive
NASDAQ 100 (QQQ) As noted above, its largest components dragged it down on Friday. The bullish case is that, while messy, it is consolidating. However, below 64.50 that's in question, and under 64.25 the down trend may gain momentum. If it moves higher, 65.77 is a key level to break before the bigger test of the consolidation highs at 66.37. Subs: Pivots Flat
ETFs:
GLD 165.00 -165.50 is a very pivotal area. Friday's range could be used to define next week's direction. Upside looks like 166 then 167.50. Down side looks like 163.20 then 162.30.
SLV Inside day right on the 50 DMA. 32.20 is the breakout up which could run quickly to the 33 area. Look for support at Friday low, 31.84 and 31.60 areas.
XLF (Financials) Nice confirmed bullish phase led by a nice breakout by its top 3 component - JPM. Should find support at Friday's lows. Next level on the upside is 16.20
IBB (Biotechnology) Struggling at the 50 DMA and closed under the 10 DMA again. I'm staying away until it breaks 139 on a move up or tests the 134.20 support below.
SMH (Semiconductors) Nice breakout over daily consolidation with upside held back by the 200 DMA. A break of Friday's highs improves its phase and confirms a break of the weekly resistance line from the 2012 highs. Must hold 32.20 to remain positive.
XRT (Retail) A struggling transition into a bullish phase. Has potential to go either way.
IYT (Transportation) Broke 91.70 consolidation high but closed under it. Buying strength at the top of a daily range in this index has been the wrong thing to do all year. Below 92 this is a good short candidate in a weak market.
IYR (Real Estate) Nice breakout and confirmation of a bullish phase change. Look for 64.90 on the upside with support at 64.15.
XLI (Industrial Spdr Fund) Closed over breakout area of 37.40. That should be support with resistance at 37.60.
OIH (Oil Services) Will last week's death cross prevent a breakout over the 200 DMA and daily consolidation high of 39.28? Under 38.50 it is very vulnerable.
XLE (Energy) Subs: Nice strong day on Friday moving toward the top of a good two week base on the 200 DMA. Needs to break out over the base and 50 DMA at 71.80. Support is in the 70.40 area.
TBT (Ultrashort Lehman 20+ Year Treasuries) Back over the 10 DMA but in the middle of a 3 week range.
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 using fudge factor and time confirms. I suggest you decide on 1 or 2 that have a risk you like and then position size accordingly.
Category 1: (Aloha) Positive Phase, Condition 1, 2 days under the FTPs, Risk to Previous Day low, Can buy ½ over FTP and ½ over R1, Target- Day to at least 3 ATRs from entry:
LTD Almost an inside day, tested Thursday's low and 10 DMA. 51.65 is a 2-day breakout. Max risk 50.85
SJM Very tight consolidation on Friday, and nice daily flag. Good risk is PDL at 87.48
Category 2: (Pipeline) Positive Phase, Condition 2-3, 2 days under the FTPs, Risk to Previous day low, Can buy ½ over FTP and ½ over R1, Target- Day to at least 3 ATRs from entry:
CRM Inside day
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:
VAR Very strong day. Look for OR reversal over FTP area of 70.30.
WPI Inside day broke out. Now FTP lines up with Thursday high in 88.40 area. Max risk 87.70
ANF Big daily breakout over 46.33 on Friday. Consider trades that have entries over and risk level under 46.00.
SIG Very compressed daily. Max risk should be 53.35. Daily breakout is 54.50.
AMT Look for breakout over 75.60 with a risk under 75.20.
MPC Daily breakout on Friday, look for OR reversal over 60
JNJ 70.50 is a good daily breakout and strong confirmation of a resumption of its bullish phase.
TEX Over 25 breaks a multi-month base for a breakout. OR Reversal with R1 in your stop looks good too.
DO Pivots are negative so entry should be above FTP at 68.68. It has a very orderly flag following a recent move back into a bullish phase. Resistance comes in at the flag high area of 69.40 -.60.
FDO Nice move out of a flag on good volume on Friday. 70.20 has been pivotal and lines up with S1. Max risk is PDL at 69.95. Key resistance to break is 71.20. Look for support at 70.50.
CREE Inside day. 33.00 is the number to break.
TWX Back to Condition 1 with a move out of a daily flag and back over a strong 10 DMA. S1 and Thursday's high line up as good support for a risk point or OR reversal area. Also in a good position to follow through over Friday's high of 46.85
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:
BEN Today's low touched the 50 DMA again. Max risk 126.20
Phase Change: PNRA *Slingshot on Thursday and a confirmed phase change on Friday.
Shorts:
Category 5: Titanic-Bear Phase, Negative pivots, not oversold, Risk R1 or previous day high. Target: Day to swing
XEC Got crushed on Friday. I would only look for OR Reversals. The major daily breakdown level was 59.40 which lines up nicely with R1.
AGU Very tight 3 week consolidation. Key level to break is 99.65, just below Friday's low. The 1-day pivot low lines up with 100 which is a significant resistance level. The FTP at 100.40 also lines up with good resistance. OR reversals or a breakdown look good.
APA Inside day. I'll only consider trades below Friday's low of 76.11
GS 4 days of consolidation breaks down at 116. Max risk is 118
BC Big reversal day against swing highs from 2012 and 2011. Should have resistance at 26 and the 26.60 area
SOHU Big volume weak day. Key area of resistance for an OR reversal is 38 where Thursday's low and the FTP line up. 37.45 is the key support level to break for a breakdown.
CNQ Positive pivots but has a nice bear flag. I'll only enter below FTP of 28.20.
MJN Inside day. Only looking for a breakdown below 60.60
ROSE Testing major weekly support around 44.20-.30. Only looking to sell a breakdown below 44.10
Best wishes for your trading,
Geoff Bysshe
