You know the rich Great Uncle we all have that shows up only once in a while, but when he does, it’s super fun since he’s generous and fun and freely gives out candy?
In the case of the Federal Reserve and Janet Yellen, I guess we really should say “Great Aunt,” but at the risk of sounding a bit non-PC, aren’t the Uncles usually more exciting?
If the Great Uncle is more amusing-I imagine that might be in the most ephemeral way. After all, candy only lasts so long and goes so far. When the Great Aunt shows up, she most likely offers treats conditionally. It may sound harsh at the time, but at the end of the day, the reward usually turns out to be longer lasting. Practical magic!
In fact, I can almost hear Janet say, “People want to ignore what they can't understand. They're looking for logic at any cost.” Alice Hoffmann
Wednesday, the Economic Modern Family began the day despairingly until the Fed came to visit. Whether you wish to believe the visit came in the form of the generous, fleeting uncle or the realistic and sobering aunt, what matters most is that thefamily members ended the day in much happier moods from how their day began.
The mighty KRE (Regional Banks) knew something was up. His calm demeanor was duly noted by all the others, but in an incredulous way. Granddaddy Russell 2000s (IWM) woke up grouchy, but after the sugary candy, tried at least to hang in there ending with an inside day. Granny Retail (XRT) like the skeptic she is, didn’t come out to play at all. She confirmed the Warning Phase to the rest of the family.
Sister Semiconductor (SMH) is on the fence. She dipped below the 50 DMA returning to an unconfirmed warning phase (needs a second day to confirm), but did not stray too far, just in case Brother (KRE) is right. Brother Biotechnology (IBB) had an inside day (when the trading range is within the range of the day prior). He’s been reliable so far this year to take the lead when hope seems to be lost. Eyes here.
Now Sister, formerly Brother Transportation (IYT), is riding the 200 DMA. The other family members do not expect leadership from him/her; however, as a family wishing to remain intact, a further decline from the 156 level, can turn out to be a drag on everyone.
Point is my family perfectly illustrates just how the dance between the Bears and the Bulls endures.
Outside the picket fence of our family live commodities, both hard and soft ones. A big focus of mine this year as we have watching basing action on the charts. The Fed wants to see inflation at 2% before considering an interest rate raise-I still say be careful what you wish for!
“Every problem has a solution, although it may not be the outcome that was originally hoped for or expected.” Alice Hoffman
S&P 500 (SPY) Over 211.37 should held rescue this if it continues to hold 209.10 the 50 DMA Subscribers: Negative Pivots in all
Russell 2000 (IWM) An inside day just under the 50 DMA for an unconfirmed return to warning. We need you granddad!
Dow (DIA) Inside day over the 50 DMA. And the Dow at 18,000 keeps us all with seatbelts fastened, but at least, without our oxygen masks.
Nasdaq (QQQ) This looks more like an orderly 2-day correction from the highs than end of days. 108.70 good support to hold. Over 110.03 way better
XLF (Financials) Not every day an instrument trades in range that covers 3 major moving averages. This one has done so for the last 9 days. Back to an unconfirmed bullish phase
KRE (Regional Banks) Over 41.85 should drive this on to new 2015 highs. Hard to believe it will fail but always ready for anything
SMH (Semiconductors) Confirmed phase change to warning-a second day under the 50 DMA could spell trouble
IYT (Transportation) Marginally failed 156. Further failure form here will suggest overall weakness everywhere
IBB (Biotechnology) Confirmed warning phase but with an inside day right into March low support
XRT (Retail) Confirmed warning phase and close to support at 97.10 the 100 DMA
IYR (Real Estate) We thought this might see the 200 DMA and now it has. Oversold so could see a bounce off the major support
ITB (US Home Construction) Negated any bottoming action and now looking weaker
GLD (Gold Trust) 115 back to pivotal now that this could not clear the 100 DMA
GDX (Gold Miners) Now that it made a move higher, it’s in between the 100 and 200 DMAs pretty much in the middle
USO (US Oil Fund) cleared 20.29 intraday but closed just under-dips look like buys as long as this hold over 19.40
OIH (Oil Services) Strong performance after the basing action
XLE (Energy) The oil and energy sector might not go straight up, but does have decent support now to think buy dips
TAN (Guggenheim Solar Energy) Like to see this retrace down to the 50 DMA-which most likely means I too should be careful what I wish for
TBT (Ultrashort Lehman 20+ Year Treasuries) The Interest Rates look like they want to go higher regardless of policy based on this chart
UUP (Dollar Bull) Very Oversold
EEM (Emerging Markets) Correction time
EWY (South Korea) Possible island top if confirms which means a correction is in store
RSX (Russia) Over 19.91 takes out the 200 DMA and under 19.50 should correct
CORN (Corn) Possible bottoming pattern-has to confirm
BAL (Cotton) Futures look good and even better over 68.00
SGG (Sugar) Futures held 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 2, Intermediate-Term Positive 5, andLong-Term Positive 5, aggregate makes it a positive 12. Still in a trading range within a trading range but with a cautiously neutral tone, especially with short-term trades. NOTE: Market Tone is updated before the open each day and reported to you on twitter.
Category 1: N/A
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)
RMBS Neutral pivots. Over the 80 monthly moving average. Inside dy. Small stock but decent ATR. Risk 13.70 has to clear 14.27
Category 4: N/A
Phase Change:
JCP Reports May 14th Tested the moving averages and closed above them making today’s low max risk. Like over R1
BBRY 10.13 support to hold if clears 10.46
EMC Waiting to see the slope on the 50 DMA neutralize but did confirm the recovery phase
MU Like the comeback so now waiting for the 50 DMA to neutralize and this to clear R1 29.07 risk to today’s lows
Shorts:
Category 5: Titanic-Bear Phase, Negative pivots, not oversold, Risk R1 or previous day high. Target: Day to swing
DISH Reports May 11th Inside day with the slope on the 200 DMA neutralizing. Tight risk to above Tuesday’s high if fails today’s low Confirmed Distribution Phase
Category 6: N/A
Best Best wishes for your trading,
Michele Schneider
