Prepared by Geoff Bysshe, President of MarketGauge, filling in for Mish for Until February 11th.
The SPY's have now seen 3 days in a row of a 1% or more move in the opposite direction of that day before. Furthermore, it's tapped a higher high and lower low each time creating a broadening pattern of chop rather than a more constructive compression pattern.
The other indexes have different patterns but they're not much better. I'm going to continue to expect more choppy action that could leave the market at its high or low by day's end.
S&P 500 (SPY) When markets travel in such wide ranges back to back I have less confidence in the support and resistance levels within the range. Focus on the pivots and the opening range levels. Subs: Pivots are positive and FTP lines up with a significant pivotal area at 151 and S1 sits on 105.40 which is important near today's low.
Russell 2000 (IWM) Did you notice it peaked at the close of Friday (90.37)? Almost feels like a market that just wanted to prove it could get back to where it gapped down from. 90.70 is the high, and on the downside the 89.90 level is where I'll be cautious. Subs: Pivots positive
Dow (DIA) After the initial first 30 minute run up it just went sideways. The afternoon range defines the levels to focus on.
NASDAQ 100 (QQQ) In the last three days it has traveled the range of the year. The range isn't that big, but it's a good example of my comment in the SPY's above - after back to back wide ranges days don't expect there to be much support or resistance with in the range.
GLD Again... 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) The only way for this to stay in the wedge is for it to not trade! Same thoughts as Monday and Friday's comments, but now it's more compressed.... The wedge beginning in mid-January 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) A healthy recovery today. 17.50 continues to be a pivotal level that could be used for reversal trades. Subs: the one day pivot low lines up with 17.50.
IBB (Biotechnology) Inside day sitting on support. Has the potential to go either way but if the market is positive this is a good place to look for a long but don't chase it.
SMH (Semiconductors): It had a nice strong day as expected with an up market day. It's not running away but its strong. I prefer to buy weakness rather than a breakout.
XRT (Retail) A big volume come back to close over the swing high. 67.20 should be good support now.
IYT (Transportation) 102.50 is the key support and 104.65 is a big breakout.
IYR (Real Estate) Has a tight 4 day range that is right under the 10-DMA. It could have a nice move in either direction when it breaks out of the range.
USO (US Oil Fund) It looks very undecided, but after today's tight range it could move nicely in either direction when it breaks today's range.
OIH (Oil Services) Another consolidation day. Monday'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) 78.20 is the big number to break on the upside, then 78.60. Look for support at today's low of 77.56. Watch this and OIH together.
TBT (Ultrashort Lehman 20+ Year Treasuries) 68.72 is the important level to break on the upside and 68.20 should be support..
XOP (Oil and Gas Exploration) Big up day took out the swing high from last week, I'll look for and OR reversal on the long side here.
XHB (Homebuilders) The low of the day, 28.25, is at the 20 DMA so this is a good place to watch for a break in either direction with the upside level to break being 28.82. The next level lower is the 28.00 level.
* * * * * * 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:
MCD Inside day on the 10 DMA. Must be above 94.50
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)
TRIP: Good volume pattern intra-day. Looking for it to take off, but also like an OR reversal against FTP and key level at 46.50
LNKD: Prefer to have it over 124.00. Has rested for 4 day's now.
BAX: Big weekly resistance / breakout at 69.00 then fizzled out. Didn't fail, however, so I'll try a breakout or a reversal over 69
RHT: Two inside days that could break either way, but I prefer the upside 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: prefer to have my stop include 63.00
F: Prefer an OR reversal around 13.10 or 13.00
SWN: Looks coiled to run. Must be above 33.80
HOG: Prefer it to be over 52.30. 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:
N/A
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 32.40.
Other Shorts: Not in a negative phase but in a position to fall if the market sells off
RAX: Inside day. Watch if breaks 75.00
NUE: Inside day. Watch for a break of 46.00
Best wishes for your trading,
Geoff Bysshe
President
