At the risk of sounding like “Monk”, the obsessive detective brilliantly acted by Tony Shaloub in the 2002-2009 TV series, the “connect the dots” game I’ve played with my “Economic Modern Family”, and the “drama” among Retail, Semiconductors, Biotechnology, Regional Banks and Transportation, all under the watchful guise of the Granddaddy Russell 2000s keeps preventing us from fully committing to the long side.
We came into this week watching to see if any of those groups could catch fire and if the Russell 2000s might take out 2015 highs or break down under the 50 DMA. Thus far, it tested the 50 DMA but held.
Furthermore, the Dow at 18,000, which has been the cruising altitude to maintain, came with the counsel to “keep your seat belt fastened throughout the flight, as we may experience turbulence.”
In the series “Monk”, his obsessive attention to detail allowed him to spot tiny discrepancies, find patterns, and make connections. The takeaway is that for active traders in general, we all seem to have taken on Monk-like behavior. Is it serving us well or not?
Yes, I like to focus these days on the discrepancies of the Economic Modern Family sectors along with the Russell 2000s. And it does indeed help with finding patterns and making connections. However, these discrepancies, patterns and connections are typically good for a day or two. Intermediate and longer term, I go back to theoverall trading range in so many instruments, stubbornly in place even when the details suggest that the range might break one way or another.
Regional Banks ultimately failed the 50 DMA-need a second day confirm.Semiconductors cleared its 50 DMA- need a second day confirm. Retail is holding its 50 DMA and in a trading range. Biotechnology tested and held the 50 DMA-if it breaks it on Tuesday, guess what? It will need a second day confirm. Transportation hasn’t gotten close to taking out the 50 DMA so let’s use 156 the 200 DMA as our line in the sand.
In some episodes of Monk, the killer's M.O. is known, but not who did it or why. In the ongoing episode of the Market, we know the M.O. of our trading range. Many of us are still trying to figure out what makes it test the highs and lows of the range and why.
S&P 500 (SPY) Cleared 212.24, then sold off. This could be the reversal from new highs thing that has happened a lot this year. Question always is whether or not it confirms that reversal. Support at 209.00 Subscribers: Negative Pivots inSPY IWM and Positive in QQQ DIA
Russell 2000 (IWM) 123.86 the 50 DMA to hold. Back over 125.12 better
Dow (DIA) Fell to the fast moving average and held marginally after trying to take out the trading range since March. Perfect example of what type of trading action I’m talking about.
Nasdaq (QQQ) New high intraday then failure to hold Friday’s low. If this gaps lower, we are looking at a possible island top-of course that too requires confirmation.
XLF (Financials) Closed right under the 50 DMA giving us a confirmed phase change back to warning. Fins have been a reason why the market is not currently trading much higher.
KRE (Regional Banks) Been above the 50 DMA since February 6th. Until Monday.
SMH (Semiconductors) Unconfirmed phase change to bullish if holds 56.23 area
IYT (Transportation) 160 the point to clear 156 the point to hold
IBB (Biotechnology) Whoa big brother-sorry to hear you’re not feeling well. At least you held the 50 DMA. Get better soon!
XRT (Retail) Holding the 50 DMA at 99.56
ITB (US Home Construction) Looks like it might pierce below 26.59 in which case looking at the possibility of 25.15
GLD (Gold Trust) Unconfirmed recovery phase if holds 144.45
GDX (Gold Miners) Amazing how tough this has been to get the close over 20.00. But when it does….
USO (US Oil Fund) Consolidating just over the 100 DMA. Needs to hold 18.25 and clear 20.29
OIH (Oil Services) Consolidating and worth watching
TAN (Guggenheim Solar Energy) Perhaps we can get a correction to around 45.00
TBT (Ultrashort Lehman 20+ Year Treasuries) The Interest Rates should remain choppy with a good possibility of a rate rise, but with no real commitment on that as yet
EEM (Emerging Markets) Closed on another new 2015 high
EWP (Spain) Resistance at the key monthly moving average 36.32
EWY (South Korea) Consolidating after last week’s gap higher
BAL (Cotton) Futures look good and even better over 68.00
SGG (Sugar) Futures close above the 50 DMA and for the first time since 2010 look like its bottoming
PHO (Water) Worth watching if closes over 25.55 for a long term swing long
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
***Market Tone: Short-term Positive 0, Intermediate-Term Positive 3, andLong-Term Positive 6, aggregate makes it a positive 9. Still in a trading range within a trading range but with an even more cautiously neutral to positive tone, especially with short-term trades. NOTE: Market Tone is updated before the open each day and reported to you on twitter.
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:
RAI 2-day correction to the 10 DMA. Like it for ½ over the pivots 75.83 and the other ½ over R1 74.47
Category 2: N/A
Category 3: (Double Up) Positive Phase, Condition 1 through 4, Positive Pivots which means can either buy an 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)
AAPL over 133.60 takes out the all-time high since the split.
VZ Reports May 21st We like it but did the daytrade in case it was a new 60-day high and failure. But, if not, like against 49.50 the 10 DMA for a swing
EL Reports May 5th Like the hammer doji on the 10 DMA. A move over 83.45 on the open could yield a good day to miniswing trade. Risk to today’s lows
ECL Reports before open. Like over 116.63 risk around 115 for swing
Category 4: N/A
Phase Change:
IBM Could not hold the 200 DMA so we daytraded it. But, we like it still especially over 171.91 risk to the lows of the day if clears
BBRY Reported 10.14 support to hold if clears 10.46
EMC Has to clear 27.00 I would say now and then can risk to 26.60 the 10 DMA
SLB Inside day just under the 200 DMA. Like over 92.69 with risk to 89.00 for swing
MU 2 Inside days after some good call buying. Like over 29.80 risk 28.78 for swing
Shorts: Some ultrashorts have possible glass bottoms today such as SDS-good to watch if the market sells off more
Category 5: Titanic-Bear Phase, Negative pivots, not oversold, Risk R1 or previous day high. Target: Day to swing
DISH Reports May 7th Under S1 only
MON 119 max risk with a move under 117.26 after the inside day worth taking as a mini to swing
Category 6:N/A
Best Best wishes for your trading,
Michele Schneider
