This low volume week can be considered one of choppy digestion and correction. The indexes drifted lower however, I’m not getting overly bearish at this point. Although, I am exercising caution and closely watching the support levels in the four major indices. The S&P 500, Russell 2000 and the Dow Jones Industrial Average all closed under the 10 day simple moving average, but are holding support levels.
I don’t see this as anything to be frightened of as long as the markets hold support. See this week's Outlook Video for more detailed look at some warning signs to watch for if the markets start to slide.
It's likely that we'll see more of the typical low-volume chop that is characteristic of summer trading. Make sure you trade instruments with good volume to avoid getting caught up in any messes.
GLD is a particularly interesting ETF to keep an eye on, as it is flirting with the 50 DMA and may soon change phases.
In the upcoming week, watch how the four major indices react to the 10 DMA and how they hold their lines of support.
Subs: Pivots in all 4 indexes are now negative. Watch for R1 to break for a more bullish outlook.
S&P 500 (SPY) Holding moderate support at 168.50. Under the 10 DMA.
Russell 2000 (IWM) Beware of weakness below 104. If 104 breaks, the next support is 103. Below 103, could see a test of the 7/11 gap at 101.94.
Dow (DIA) Nearly filled the gap from 7/11. If 153.29 breaks, this could test the 50 DMA.
Nasdaq (QQQ) Under pressure but holding up well. The 10 DMA needs to hold.
ETFs:
XLF (Financials) Inside day, under the downward sloping 10 DMA. Watch the range break either way.
SMH (Semiconductors) Closed under the 50 DMA, bringing this into an unconfirmed warning phase.
XRT (Retail) Low volume sideways action. Under the 10 DMA.
IYT (Transportation) Holding support around 115.75 but closed under the 10 DMA.
IBB (Biotechnology) 193.86 is an important area to hold.
IYR (Real Estate) Nice move up today but is now approaching resistance.
XHB (Homebuilders) Choppy sideways action.
GLD Trying to break through the 50 DMA. This remains in a bear phase.
USO (US Oil Fund) Gapped higher and continued to rise. Closed over the 10 DMA.
OIH (Oil Services) Holding the 10 DMA. Recently over the 80 monthly.
XLE (Energy) Inside day.
TBT (Ultrashort Lehman 20+ Year Treasuries) Sliding lower and choppy. Although, the upward sloping 50 DMA is catching up to the price.
UUP (Dollar Bull) Holding the June lows.
EWG (Germany) Subscribers: Inside day
FXI (China) Subscribers: Confirmed the Recovery phase and cleared the 10 DMA.
EWW (Mexico) Subscribers: Inside day, sitting on the 200 DMA.
SGG (Sugar) Subscribers: Nice move today. 59.55 is the next hurdle.
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) 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:
EPD Inside day. This NEEDS to clear Friday’s high, which will also put this over the 50 and 10 DMAs.
Category 2: (Pipeline) N/A
Category 3: (Double Up) Positive Phase, Condition 1 through 4, Positive Pivots which means can eitherbuy 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)
CBST Corrected to and held the 10 DMA. Watch for a breakout or reversal with Friday’s low as risk.
AET 63.50 is max risk. Look for a breakout over the 10 DMA.
AGO Made a nice move, with big volume on Friday. Now in an unconfirmed bullish phase with good support on the 50 DMA (which is starting to slope up).
GME Holding the 10 DMA. Friday’s low must hold. Watch for a breakout or reversal.
KRFT 2 inside days and holding the 50 DMA. Watch for Friday’s high to clear and the 50 DMA must hold
CBG Very good support on the converging 10 and 50 DMAs. Watch for a breakout or reversal. 23.05 max risk.
WDC Confirmed the Bullish phase. Watch for an ORR against Thursday's high and S1 to control risk.
OI Recently over the 80 monthly. Watch for an OR reversal against S1 or a breakout over 30.83.
ISIS Compressed between the 10 and 50 DMAs. Watch for a breakout or reversal over the 10 DMA.
ALKS Corrected to and held the 10 DMA. Friday’s low is max risk.
Category 4: (Rip Tide) N/A
Other:
DISH After a correction with compression. This looks poised for a move up. Possible resistance at 46.00.
MCK Friday’s low is max risk. Look for a reversal or breakout against the 10 DMA.
Shorts:
Category 5: Titanic-Bear Phase, Negative pivots, not oversold, Risk R1 or previous day high. Target: Day to swing
MAR Unconfirmed warning phase. Watch for Friday’s low to break. Tight risk against the downward sloping 50 DMA.
PM Inside day under the 50 DMA, which is sharply sloping down. Watch for Friday’s low to break and Friday’s high to hold.
Category 6: White Cap-Havinag 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 lows
TTM Friday’s high is max risk. Unable to clear the downward sloping 10 DMA. Will likely meet recent lows.
Best wishes for your trading,
Geoff & Matt
