Prepared by Geoff Bysshe, President of MarketGauge, filling in for Mish for Until February 11th.
Today was the opposite of Friday. Later comer bulls could be feeling trapped by the gap down to start the day virtually under the Friday lows.
Europe may have been the markets' excuse to sell off, but it was not a strong enough reason for the market to be as weak as it was. The size of the move down was not very significant but the mood of the move was decidedly down.
The result was a close under the 10-DMA in 3 of the 4 major indexes - a first in a long time. One day is not enough of a rest for this market so another few days of chop or down would be constructive and should be anticipated.
S&P 500 (SPY) Any new longs put on Friday are now trapped by today's gap and drop. The 149.50 area is pivotal with resistance at today's high area. Subs: Pivots are negative and R1 lines up with a significant resistance area at 150.30.
Russell 2000 (IWM) No surprise that is could not get back over the 90.20 level after the gap down. Now 89.90 is a likely key resistance level. Support to consider is at 88.70-.50. Subs: Pivots Negative. The S1, at 88.80, and S2 at 88.50 both line up with key daily levels - so does R1 at 88.92, but the Friday low at 88.85 may be more significant.
Dow (DIA) The only one of the 4 major indexes to hold the 10-DMA, but a break of 138.30 could lead to a quick drop to 136.50. Key resistance at 139.40
NASDAQ 100 (QQQ) I think the best way to look at this is to play the range levels of around 66.00 and 67.80.
GLD No change from Monday's point of view...Trapped between the 200 and 50 DMA. I think that if you want to trade this right now on the long side you should consider SLV instead - the chart is cleaner. Either way, I'd wait for a break of the last three day range for a momentum trade.
SLV (Silver) Like GLD, same thoughts as yesterday's comments, but now it's more compressed.... Friday's range defines the tipping point of a multi-day wedge. Therefore, a break of this range could lead to a nice directional move. I'll only trade the long side move and 31.22 and 31.41 are key levels to break with a target of 32.40. Subs: look at the 60 minute chart and you'll see the wedge. Draw the trend line from the Sept. 2012 highs and you'll see the target area.
XLF (Financials) Into support but needs to get back over 17.50 or pull back to 17.25 to be interesting
IBB (Biotechnology) Into support but like most other indexes, let's wait for a better pattern.
SMH (Semiconductors): This was one of the stronger groups today. If the market looks bullish tomorrow, this is interesting over 34.80. The 10-DMA could be support at 34.36.
XRT (Retail) A very well defined range with a clean support line at 66.20, then a clean shot down to 65.70.
IYT (Transportation) 102.50 is the key support and 104.30 is the resistance.
IYR (Real Estate) Nice pull back, traded well on Friday and held up well today. Look for support at Friday's low, 67.40 and potential for a move back to the highs if it clears Friday's high of 67.85.
USO (US Oil Fund) Most of its move was in the gap, but it looks vulnerable if it moves lower.
OIH (Oil Services) Inside day and basically held its 30 minute O.R. low. Today's high at 43.86 is the level to break for a move higher. Look at the weekly chart. Draw the wedge resistance line from the 2/24 high (let it also extend back to the week of 8/19/2012. It may be a rough ride up but there's big potential here.
XLE (Energy) Very similar to OIH but the short-term is still a little unclear, but long-term looks very similar if not better than OIH. Subs: watch this and OIH together.
TBT (Ultrashort Lehman 20+ Year Treasuries) Very strange inside day pattern in the middle of a larger range day. I favor the break to the upside, but a break below today's low could follow through too.
XOP (Oil and Gas Exploration) Held its 10-DMA, but not a clear pattern. Subs: Watch the 10 DMA now to hold, but action is getting choppy.
XHB (Homebuilders) The low of the day is at the 20 DMA. The next level lower is the 28.00 level. There's a fair amount of resistance at today's highs of 28.82.
* * * * * * Stocks * * * * * * *
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:
N/A
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:
N/A
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: (Opening range reversals are good on anything above S1)
FCS: Inside day, like it over 15.00. Resistance at15.50.
ORLY (reports 2/6): Must be above 93.00.
TRIP: Must be over 46.00
LNKD: Prefer to have it over 124.00
BAX: Should hold and 68.20.Must hold 68.00. Big weekly resistance / breakout at 69.00
RHT: Key areas to break are 56.40 and 56.60. Trying for a big weekly breakout from consolidation and a multi-month trend line a basis. Friday high is 57.10. Must hold 55.80.
PNC: Would like 62.20 in my stop, or a breakout over 62.75
TSL: Market pulled it back down today. I prefer to see it over 5.40
WLP: Nice retrace to the 10-DMA. Must be above 64.70, max risk 64.50.
AKAM: Inside day, should be over 41.60
ROK: Inside day, should be over 90.40
EOG: Inside day, should be over today's high of 127.80
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:
F: Must hold 12.90
Phase Change:
N/A
Shorts:
Category 5: Titanic-Bear Phase, Negative pivots, not oversold, Risk R1 or previous day high. Target: Day to swing
BRCM: big support at 32.40, Prefer to enter below 32.70.
BXP: 105 is the pivotal area.
MNST: Consolidating after a big drop a couple weeks ago. Must be below 48.00
YUM: Good resistance at 64.60- 65.20 to look for a reversal.
Other Shorts: Not in a negative phase but in a position to fall if the market sells off
ONXX: Prefer it to be under 77.75
RAX: key resistance level at 75.60
Best wishes for your trading,
Geoff Bysshe
President
Filling in for...
Michele Schneider
