I read somewhere that it’s been over 20 years since the S&P 500 futures came within spitting distance to a new 52-week high while NASDAQ got hit with its worst loss in a year.
Regardless whether that statistic is completely accurate, the bigger point clearly is the divergence which has become the theme of 2014. Not only a theme, but a trading strategy.
Just a short time ago, I wrote that while NASDAQ and the Russell 2000s were in a warning phase, the S&P 500 and the Dow, held onto their bullish phases. Furthermore, I became troubled after March 3rd when the small caps made a new high on triple the average volume-blow off top material.
This past February, just the opposite was true. The Dow fell to a nasty Distribution Phase while NASDAQbarely broke the 50 DMA holding onto a weak warning phase.
If the market could be represented by a bobble head, it would be sitting on your desk, bobbling with one of those s**t eating grins.
For us, this has been the year of the soft commodities. We have traded equities, but not nearly as much as we did last year, and always with a core position in corn, coffee, oil and/or gold.
This week, assume the market has little fight left and that rallies will be met with selling. If SPY and DIA gap lower, assume selling weakness is ok too. Only new highs in EVERYTHING will bring back major confidence. At least with me.
S&P 500 (SPY) Time to remind you that the 50 DMA is at 183.90 Subscribers: Negative Pivots in all
Russell 2000 (IWM) Unconfirmed warning phase although confirmation seems likely
Dow (DIA) Big reversal candle and last vestige of support from Friday’s lows which if gives that up, 161.20 here we come
Nasdaq (QQQ) It looks pretty awful. Just a couple of weeks ago I was writing about the underlying weekly moving average at around77.50.
XLF (Financials) Not what I wanted to see-but has support on the way down
SMH (Semiconductors) I hate seeing a weekly piecing of a Bollinger band only to see a weekly close below. Typically means top in-at least for now.
IYT (Transportation) Ditto here as semis only this held up a bit better
IBB (Biotechnology) Don’t say I didn’t warn you
XRT (Retail) This is where I want to watch-will the retailers keep hope alive?
IYR (Real Estate) This hasn’t been up long enough to get real bearish-but-that doesn’t mean it can’t go down.
GLD 125.50 or 121-what will see first? 125.50 we can now say. Many gave up on that golden cross-now it gets interesting
USO (US Oil Fund) Confirmed accumulation phase. Now this too gets interesting
XLE (Energy) Our portfolio has hit two profit targets here so now we ride out the tail with a good stop
TBT (Ultrashort Lehman 20+ Year Treasuries) 67.00 support to watch
PHO (Power Shares Water Resources) Proof that technical outweigh everything-we can’t live w/o water-yet, this got hit too
UUP (Dollar Bull) Will wait to see if 21.50 holds
KRE (Regional Banks) The strong, silent type that got hit in the head
FXI (China Large Cap Fund) Subscribers: Like to see this hold 35.00 and get back over the 200 DMA but nothing is infallible if the market tumbles
CORN (Corn) Subscribers: Over 35.24 hard to argue with
SGG (Sugar) Subscribers: If this gets over 59 and stays there-you’re not too late
JO (Coffee) Subscribers: Missed the blast off on Friday-now watching to see if it holds 36.20 and if not, 35.00
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
***Note: We are around 25% invested in the portfolio with some cushion in all existing positions. We exitedONVO YUM SFM before they violated their slingshot lows because if the market is heavy, they will fall hard. But, if the setup is there on any of these on Monday, we will start a fresh trade.
Category 1: (Aloha)N/A
Category 2: (Pipeline) 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)
SWC It’s a commodity so not surprising to see it hold up. Now, 15.05 is risk point and over 16.04 takes out recent highs. Like an ORR or breakout
Category 4: (Rip Tide) N/A
Phase Change:
VXX had a possible slingshot low as did all the index ultrashorts-I will be watching SDS TWM in particular along with VXX
ONVO We protected ourselves, but this did hold the 200 DMA. If 7.67 continues to hold, like it again over 8.35 last weeks high but might do a small position over 8.00
SFM Here again, we protected the balance, but I would watch for this to hold 34.75 and cross back over 37.62
YUM Here too if this holds 75.00 I would not hesitate to jump back in over 75.75 or so
DDD Going with the slingshot theory, if this clears 56.95, could still be a contender off the lows especially since it held the 65 week moving average
Shorts:
Category 5: Titanic-Bear Phase, Negative pivots, not oversold, Risk R1 or previous day high. Target: Day to swing
TSLA Huge drop and unconfirmed phase change to warning. If can clear 217, could see drop to 190
GS Broke all 3 moving averages and merits a look if cannot clear 165.50 to see if can fall to 159.50
TIF If cannot clear Friday’s high then see a possible drop to the 200 DMA 83.16
Category 6: White Cap-N/A
Bye For Now!
