When the Federal Reserve began the Quantitative Easing, the banks, especially the CEOs, prospered the most. Banks were basically given free cash, but that did not necessarily translate to the bottom line-the rest of us!
Now, the Federal Reserve has nothing left-even if they stop the taper-which some are speculating they might do, where else is there to go? The last couple of years, since 2011, when the FED came in, the rates dropped and the market rallied.
Over the last year in 2013, rates basically flattened at their low levels. In 2014, the relationship has changed a bit. As rates firm, so does the market. Then, during each 2014 correction, including the current one, the dash toTLTs (20+ year treasuries) has become a flight to safety. In other words, rising rates and rising market meant the economy was improving.
Here is my theory, which from mostly everything I read is counter to popular belief. The Fed (already happening) loses control. The market could still drop hard, but rates will firm. Or, the relationship of low rates, Fed stimulus good for economy will shift to a Fed out of control and banks charging more money for what they lend.
Therefore, looking at the charts, (I can muse til the cows come. It’s the technical analysis that rules our entries and exits), the ultrashort or TBTs broke a long term channel on Friday. If they turn and clear that channel, we will be looking for at least, a temporary run in rates which could get even more extreme.
As far as equities are concerned, we have very little on as the market is in warning, getting oversold, but way too vulnerable to buy right here.
S&P 500 (SPY) Oversold in its confirmed warning phase. That’s the support-the oversold condition and on only certain relative strength indicators-not worth that much Subscribers: Negative Pivots in all
Russell 2000 (IWM) Hit the 200 DMA. Will it stick? Stay tuned
Dow (DIA) confirmed warning phase also approaching oversold
Nasdaq (QQQ) Pretty close to the 200 DMA so have to assume it could get there like its small cap brother. What it does from there remains to be seen
XLF (Financials) Oversold on near term indicators and real close to the 200 DMA at 20.99
SMH (Semiconductors) Held the 50 DMA-as I have mentioned all year, the place to be first if the market firms
IYT (Transportation) Unconfirmed warning phase
IBB (Biotechnology) Broke the 200 DMA-and critical oversold indicators on the weekly chart
XRT (Retail) Have you ever come to my free webinar on phases? The cycle? From bullish to warning and now to distribution-have to assume things get worse before they get better
IYR (Real Estate) Another one still defending the 50 DMA
GLD Bull phase but not that interesting at least to me
USO (US Oil Fund) 37.74 the place to clear
TBT (Ultrashort Lehman 20+ Year Treasuries) An open over 65.70 will interest me-a close above will really interest me
FXI (China Large Cap Fund) Nasty gap below the 200 DMA which if not filled, could put pressure back here
CORN (Corn) Subscribers: Did not confirm a slingshot high which is a good thing for our long
SGG (Sugar) Subscribers: 55.00 still the number to defend
JO (Coffee) Subscribers: 37.50 good place to watch
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:
XOM (Reports 4/21-4/25) Inside day. Under the 10 DMA which has to clear 97.40.
WEC (Thanks Mike) 3 inside days with a clear range break trade-has to take out Fridays high and hold Friday’s lows
EQT Reports 4/24 before open If holds 101.45 and clears Friday’s high, then one that could see new highs if the market firms
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:
HST Not the pick of the century, but following our rules, outperformed, held S1 and corrected. Therefore, if holds Friday’s low and clears Friday high, worth a shot
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)
BPO Inside day and slightly negative pivots. Has to hold Friday’s lows and take out 19.72
SWC holding the 10 DMA and has to hold Friday’s lows and clear 15.60 once and for all
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:
YUM Marginally oversold but sitting on the upward sloping 50 DMA. Over R2 really and Friday’s highs could try again with long term charts still ok
Phase Change:
MPW Converging moving averages which means even with the down move Friday, still a contender over Friday’s high
DVA If this holds Friday low and clears back over the 50 DMA, R1 and Friday’s high, in the healthcare sector, therefore, not bad to follow-and its holding the January calendar range breakout
Shorts:
Category 5: Titanic-Bear Phase, Negative pivots, not oversold, Risk R1 or previous day high. Target: Day to swing
DLR Resistance Fridays high as the converging moving averages are now above and it is below the 80 month average
CONN 40.00 max risk with room to 34.00
Bye For Now!
