Last Thursday night I checked the market before going to bed, saw it was down 12 handles, poured myself a nightcap, then tried hard to sleep fitfully to no avail.
Lo and behold, I awake Friday morning to see that not only did the market roar back before the open, but then proceeded to run up and close up 185.66 points in the Dow! Money for Nothin’ and Chicks for Free.
What really happened? I wish I could say peace broke out. Instead, let’s measure technical progress viathe phases. The Small caps-an inside day under the 200 DMA-no change to the distribution phase.NASDAQ-an inside day, over the 50 DMA or bullish phase, leaving a range break to follow with relatively strong confidence to follow through on Monday. The Dow and S&P 500, remain in strong warning phases yet broke the range from last Tuesday through Thursday, but could not clear their last Monday’s highs.
Inside days are very often gifts for the technical trader. As the phases did not change at all last week, and in the cycle, they do appear to be deteriorating, we nonetheless have to respect the inside day and the strength in NASDAQ, weakness in the Russell 2000s. A break of Thursday’s lows, really, should seal the fate. A break above and we have to look at overhead 50 DMAs in DIA and SPY, plus the overhead 200 DMA in IWM as the real test and measure of the current tone: near-term neutral, intermediate term bearish.
S&P 500 (SPY) If it clears 194.40 good chance we will see the 50 DMA but if not, and rolls under 191.50 area, trouble again Subscribers: Positive Pivots in all
Russell 2000 (IWM) Inside day. The 200 DMA still looks pretty far so calling this a rally towards resistance
Dow (DIA) The best news here is that last Thursday it made a new 60-day low on the 200 DMA and then roared on Friday leaving a strong possibility of a reversal off the lows that can last. But, that needs to confirm
Nasdaq (QQQ) Inside day and above the 50 DMA-not a wow, but then again, at least its holding in a bull phase.
XLF (Financials) Right to the 50 DMA resistance on Friday. Let’s see what this has if anything
KRE (Regional Banks) Meager Inside day
SMH (Semiconductors) Meager Inside day as well
IYT (Transportation) Calling this neutral
IBB (Biotechnology) Looks better pushing up against the 50 DMA
XRT (Retail) Now a really wanna be bull chart formation!
IYR (Real Estate) Unconfirmed bullish phase
GLD Inside day
Metals and Mining (XME) Has to take out 43.00
USO (US Oil Fund) Unconfirmed Distribution phase
XOP (Oil and Gas Exploration) 75.50 now key to hold
FCG (First Trust ISE Reserve NatGas) Subscribers: A fave for Monday if clears the 200 DMA 20.75 and confirms the slingshot low
TAN (Guggenheim Solar Energy) Subscribers: Tried the 200 DMA but couldn’t do it-let’s keep watching
TBT (Ultrashort Lehman 20+ Year Treasuries) TLTs –Possible top? Said that before, but one day it will be true
IFN (India Fund Inc.) Subscribers: New 60 day low good close-another place to look
EWP (Spain) Subscribers: New 60 day low good close-another place to look
FXI (China Large Cap Fund) Subscribers: Good comeback and has to clear the 40.55
BAL (Cotton) Subscribers: Like this for the first time in a while over 43.30
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) N/A
Category 2: (Pipeline) N/A
Category 3: (Double Up) Positive Phase, Condition 1 through 4, Positive Pivots which means caneither 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)
NEM Unless it clears 26.50 into resistance however, overbought so see this more for day to mini
*RHT Consolidation near the highs which if clears 59.13 risk good to 58.00
CTB Nice pop over the 50 and 10 DMA and if holds Friday’s lows could see more-miniswing
*KMX If holds Friday’s lows still friendly to 54 or higher
JWN Really needs to clear 70.25 but for a mini if it does could get some great momentum after 3 months of a range
Category 4: (Rip Tide) N/A
Phase Change:
WMT Reports August 13th Inside day. Over 74.81 should see more upside and should hold 73.76
*WFC Possible slingshot low if clears 50.20risk to Friday’s lows
*EHTH Liked the action but decided to give this one more day to see if it holds-if bottom, just beginning
*LULU –Inside day under the 50 DMA so worth watching over 40.50
YOKU Reports August 21st Great move and one we daytraded last Friday-now look for an ORR against the 50 DMA
*GT Possible brick wall bottom just under the 200 DMA which means has to clear 25.04
Shorts:
Category 5: Titanic-Bear Phase, Negative pivots, not oversold, Risk R1 or previous day high. Target: Day to swing
ALGN 54.46-54.51 is the 50 DMA resistance. Under 53.20 looks lower to 51.00 next support
Category 6: White Cap-Having a 2-3 Day correction over the pivots.. In a Negative Phase, Positive Pivots. Can sell an Opening Range High Failure if happens below R1 or previous day high whatever is higher and/or weakness if breaks S1 and prior day’s low
QCOR Closed green but under the 50 DMA making todays high great risk. Has to break S1
