The week ended with a great divide. Some might say, a Continental Divide! The S&P 500 and the Dow maintained their bullish phases. In fact, the initial gap lower turned out to be a great buy opportunity in multiple instruments. The Russell 2000 and NASDAQ ended the week in an unconfirmed warning phase. However, both ended with an interesting flirtation of the 50 DMA. The bonds tell another story. Last week began with a warning phase in the short bonds and ended with a distribution phase. Lots of damage in just one week. On the flipside, the TLTs jumped into an accumulation phase. That makes traders like myself wary of the overall strength of the market but does not preclude buying instruments set up on their own velocity. And so, I go back to the beginning of 2013 looking at the sectors we expected to perform well under the same assumption: The US economy remains in better shape than the other world economies. If one understands where to look fundamentally and then uses the charts for entry timing with the lowest risk and trades intelligently, there's lots of money to make (both from the long and short side).
S&P 500 (SPY) Of course there is the possibility of triple tops from 2007, but looking at the daily chart, I see this in a bullish phase with weekly and monthly charts still positive Subs: R1 and Friday's high line up
Russell 2000 (IWM) Push to the 50 DMA after the nasty gap down. We should know fairly quickly whether this continues above the 50 DMA or now and how that bodes for the overall beta of the market
Dow (DIA) We can say the same of this only with one major difference-this held the 50 DMA and is flirting with the fast moving average.
NASDAQ 100 (QQQ) Stay tuned here as well on the status of its location to the 50 DMA
ETFs:
GLD Anybody want to know what a slingshot looks like? Check out this chart from last Thursday and Friday. Now resistance at 154 next
XLF (Financials) This did close back above the 50 DMA-one of my go to signs for checking US economy's temperature
IBB (Biotechnology) A good looking sector still, especially since it broke hard on the gap only to close nearly unchanged
SMH (Semiconductors) In a warning phase, but still a huge opportunity in this group over the coming year and beyond to watch for Subs: Will add over R1 34.40
XRT (Retail) Inside dayand still thinking those double tops at 70.81 will be history. Subs: Pivots Positive
IYT (Transportation) Trucked back over the 50 and back to an unconfirmed bullish phase. The range Friday was crazy from S3 to R1. A major favorite for me this year
IYR (Real Estate) New highs again-a reason to question a bearish stance in the overall market.
USO (US Oil Fund) Confirmed distribution phase.
OIH (Oil Services) Like SMH, in a warning phase but with a staggering move off of the lows on Friday and a nice-looking bullish engulfing pattern Subs: Watch HAL or SLB both had potential slingshot patterns
XLE (Energy) Not my first choice, but another example of how this ripped higher after the gap lower
TBT (Ultrashort Lehman 20+ Year Treasuries) 3 possibilities: 1. Gravestone Doji 2. A slingshot low 3. An island bottom in the works. Stay tuned.
XOP (Oil and Gas Exploration) Winner of my favorite group to have the best move in the coming year and so forth. Subs: Got into this today on a starter position and will add if gaps higher
XHB (Homebuilders) Yet another amazing bullish engulfing pattern worth eye balling
UUP (Dollar Bull) Interesting hammer Doji candle
SGG (Sugar ETF) Subs: Watching this for what looks like possible bottoming formation
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: With so many roaring off their lows leaving risk a bit indefinable, we (Matt and I) are picking ones where we can ascertain a move and therefore, a risk! We also have all sectors represented so try to focus on the picks in the strongest sectors for Monday.
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:
MUR Now, worth waiting for the 10 DMA to cross and then we can use a risk around 62.90
TIF Friday's low is a good risk should this clear the pivots
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:
LIFE S1 max risk at 64.38 and needs to clear the pivots at 65.00. Still looks poised
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)
CREE 48.32 is the 50 DMA and over last Thursday high 50.86 like with a new risk at around 50.00
AOL Bullish engulfing and good risk to Friday's low. If clears 40.00 could see new highs
JPM After an inside day Thursday, had a great run Friday and right up to the 10 DMA. As a 2013 financial stock pick, looking at this over Friday's high with risk 47.50 area
EQT Would like to see a reversal to get risk more inline with 66.00, but this has been a fave for 2013.
SPLK Already long, but like the move Friday and the next clearance of 40.00 on a closing basis, this could keep going
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:
UPS If holds around 83.25, in this one for a small long and will look to add
Phase Change: MBI This has to get above this base or over 10.40. CRUS Inside day and still working the slingshot LTD 46.31 is the high to clear with a risk 45.50 area ALXN Like it Friday, really like it for Monday. Unconfirmed accumulation phase now. Big eyes here. Risk Friday's low AIG Big reversal clearing the 10 and 50 DMA. Risk now 38.20 area TOL Possible Slingshot low very close to the 200 DMA JCI Right on the 50 DMA at 32.65 and oversold. Good one to watch for move over R1 for swing since cleared the 80 monthly
Shorts: Not surprising that weaker stocks now need more time to setup
Category 5: Category 6: N/A
Bye for Now!
