Prepared by Geoff Bysshe, President of MarketGauge, filling in for Mish for Until February 11th.
It's been about 6 days of volatile but directionless action in the SPY, IWM and DIA. This hardly seems like much when compared to the 24 days of the sideways action in the Q's.
Jobless claims data comes out tomorrow morning and the market may pick a direction based on that, but I would not try to out-guess the markets next move. Let's just see which way it tells us it wants to go. Until it's obvious, play the ranges in the major indexes and use ETF's or stocks for trends.
S&P 500 (SPY) Inside day could lead to a decent move in either direction but don't be surprised if a breakout of the daily range fails. Subs: pivots are flat which also suggests a significant move is possible. S1 lines up with good support at 150.60
Russell 2000 (IWM) This is the only one to trade over the prior high and it even closed there. I'd like to see it lead if the market moves higher. Subs: Pivots positive so it could be a good RO Reversal long candidate
Dow (DIA) Some nice consolidation today sitting on the 10 DMA
NASDAQ 100 (QQQ) another inside day and sideways action. The 24 day in this amazing consolidation.
GLD Still trapped between the 200 and 50 DMA. But now I think I'd look at a long position over 163.15
SLV (Silver) I'm looking for a 30 min O.R. breakout over 31.00. Until then I'm just watching.
XLF (Financials) The lower open today was an opportunity to buy against the 17.50 level. The breakout is over 17.66, but I don't want to pay up. Subs: Pivots are positive and S1 is around 17.50.
IBB (Biotechnology) If you are willing to play the bottom of the range, 146.00 is the support and it should not trade below 145.40 it is still strong. A breakout over 147.80 has good potential too after 3 days of consolidation.
SMH (Semiconductors): Inside day, but the markets did too, I'm waiting for a correction for now.
XRT (Retail) Today's low matched the 67.20 support exactly. It's still a good area to trade against.
IYT (Transportation) 103.50 is the key support and 104.65 is a big breakout.
IYR (Real Estate) Has a tight 5 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) Impressive recovery from a big gap down. I'd wait for 35.15 to break to consider longs.
OIH (Oil Services) Today could have flushed the weak longs but let's see how it trades tomorrow.
XLE (Energy) 78.20 is the big number to break on the upside, then 78.60. Look for support at 77.35-00. Subs: watch this and OIH together, XLE had a nice OR Reversal as OIH broke down.
TBT (Ultrashort Lehman 20+ Year Treasuries) Trend is up but jobs data tomorrow could push it either way.
XOP (Oil and Gas Exploration) nice move higher. Continues to be the leader in the energy space.
XHB (Homebuilders) Today's inside day only adds to yesterdays comments here...The low of the day 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. 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:
RHT Testing my patience. But sitting on the 10 DMA. I'd prefer to wait to clear 56.00 to get long.
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)
LNKD: Moved up today. Look for 124.84 and 124.00 to be good reversal areas if it tests lower, but it's also well positioned to move higher
BAX: Cleared big weekly level of 69.00. Volume was light, look for reversals over 68.90 or breakouts if the market is strong.
PNC: Big volume today. Good news if it clears 62.42, but toppy if it sells off below 62.00
F: Today's high is the 10 DMA (13.27). The 60 min chart turns positive if 13.27 is broken. 13.00 should be good support.
GM: Same idea as F. 28.60 is a big number to break then it could run.
SWN: Looks coiled to run. Must be above 34
HOG: Prefer it to be over 53 which is a very pivotal level, but reversals look good as low as 52.
Additional stocks to watch:
KSU
UNP
VMW
C
HD
NKE
NUE
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:
I don't see any real good short set ups, but that doesn't mean the market can't go down. If it is a weak day, I'll avoid longs and scan for weak stocks. However here are a few I'll consider first
Category 5: Titanic-Bear Phase, Negative pivots, not oversold, Risk R1 or previous day high. Target: Day to swing
ALXN: looking for and OR reversal with a stop over 95.50.
Other Shorts: Not in a negative phase but in a position to fall if the market sells off
RAX: Must be below 76.00
BRCM: Must be below 32.85
ONXX: looking for it to break 76.30Phase, Negative pivots, not oversold, Risk R1 or previous day high. Target: Day to swing
Other Shorts: Not in a negative phase but in a position to fall if the market sells off
Best wishes for your trading,
Geoff Bysshe
President
