I refuse to be lulled into complacency, but this is starting to feel familiar. The past seven trading days have seen the indexes open the day by testing/searching for support. After the support has been tested, theindexes then began their grind higher. However, today was a little different (and I won’t necessarily expect the same tomorrow). Instead of grinding higher the indexes sprung higher. Still, even with the vigorous action, three of the four indexes closed under the 10 DMA. Nasdaq (QQQ) was the only index that closed above the 10 DMA, and did so with authority! Nasdaq was given a boost by AAPL’s impressive performance, which was performing well beginning with it’s opening range reversal (which is where we got in). AAPLreally began to fly when Carl Icahn tweeted that he had a large position in AAPL and said that he believed it was undervalued. Behold the power of social media! The main thing to keep in mind is that the indexes have been consolidating for the last four to five days. Watch for the recent highs to clear and for the indexes to hold the 10 DMA and recent lows. TBT closed on yearly highs.
S&P 500 (SPY) Tested and held the prior day low. Climbed back but closed just shy of the 10 DMA.Subscribers: Pivots Positive.
Russell 2000 (IWM) Took out yesterday’s high but closed under the 10 DMA. Subscribers: Pivots positive
Dow (DIA) Held recent lows and had a doji day. Subscribers: Pivots positive
Nasdaq (QQQ) Looking very strong (with AAPL’s help!). Highest close in 13 years! Subscribers: Pivots positive.
ETFs:
XLF (Financials) Expect a visit to the 50 DMA if today’s low is broken. Recently over the 80 monthly.
SMH (Semiconductors) This was starting to look dicey but, climbed over the 10 DMA. Now in an unconfirmed bull phase.
XRT (Retail) Closed over the channel that we have been mentioning. Now over the 10 DMA.
IYT (Transportation) Expect a visit to the 50 DMA if today’s low is broken.
IBB (Biotechnology) 190.90 is an important area to hold. It should find support there.
IYR (Real Estate) Watch for 64.00 to hold. If that breaks, this could test the June lows.
XHB (Homebuilders) Choppy sideways action. Holding support and under resistance.
GLD Confirmed the recovery phase. May test support at the 50 DMA.
USO (US Oil Fund) Grinding higher. 38.12 is the next hurdle.
OIH (Oil Services) Nice move from the inside day. 45.94 is the next hurdle.
XLE (Energy) Sideways and choppy under the 10 DMA.
TBT (Ultrashort Lehman 20+ Year Treasuries) Gapped higher and spent the day consolidating near the gap level. Highest close of 2013.
UUP (Dollar Bull) Gapped up again, this time over the 10 DMA. An island bottom is in place.
EWG (Germany) Subscribers: Matched the highest close of the year.
FXI (China) Subscribers: Another gap higher. Approaching resistance at the 200 DMA and 23 monthly.
SGG (Sugar) Subscribers: Sweeter and sweeter. Closed over the top of the channel, that has been mentioned frequently in Mish’s videos.
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:
HP Inside day. Correcting, compressing and holding the 10 DMA. Today’s high must clear and today’s low must hold.
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)
BMRN Two inside days, holding moving average support. Compressed for several weeks. Today’s high must clear and today’s low must hold.
GME Very compressed at the 10 DMA. Today’s low must hold. Watch for a breakout or reversal.
NYT Recently over the 80 monthly. Watch for a breakout or a reversal against the 10 DMA. Possible resistance at 12.33.
OI Recently over the 80 monthly. Watch for an OR reversal or breakout against the 10 DMA.
GMCR Inside day and compressed at the 10 DMA. Must clear today’s high and hold the low.
K Beginning to lift off from the 10 DMA. 66.11 is next resistance. Today’s low must hold.
ETN Holding support on the 10 and 50 DMAs. Watch for a breakout or reversal.
AON Inside day over the 10 DMA. Today’s high must break and the low must hold.
Category 4: (Rip Tide) N/A
Other:
CIEN Watch for an opening range breakout or reversal against the 10 DMA. Recently over the 80 monthly.
SLB Watch for an opening range 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
KMP Watch for a breakdown or OR high failure under today’s low.
NOW Only go short if this has a breakdown or reversal under today’s low.
Category 6: N/A
Best wishes for your trading,
Geoff & Matt
