This morning was ugly. The three indexes with inside days (S&P 500, Nasdaq and Russell 2000) gapped below the range of their inside days. The Dow Jones Industrial Average (DIA) fared the worst with a gap below the 50 DMA, bringing it into an unconfirmed warning phase. A second close under the 50 DMA will confirm this phase change. Nasdaq held up the best out of the four major indexes.
Watch for the indexes that are above the 50 DMA to hold the moving average and to clear the recent swing lows. Every index had a distribution day in volume. The uncertainty was favorable to GLD and the gold miners (if you were trading with us you would have caught these break outs). TBT was very volatile. It slid downward most of the day after gapping higher on the open. It experienced a late day rally and closed near its opening price. Home Builders fared well during the slide in rates.
Tomorrow, we'll watch for stocks with impressive volume, stocks that have held up well in today’s sell off and stocks that closed well and are holding moving averages.
S&P 500 (SPY) Gapped under the inside day and tested the 50 DMA. Distribution day in volume. Holding the 50 DMA Subscribers: Pivots negative.
Russell 2000 (IWM) Gapped under the inside day and tested the 50 DMA. Distribution day in volume. Holding the 50 DMA Subscribers: Pivots negative.
Dow (DIA) Gapped under the 50 DMA and was unable to climb above. Distribution day in volume.Subscribers: Pivots negative.
Nasdaq (QQQ) Gapped under the inside day. But stayed well above the 50 DMA. Distribution day in volume. Subscribers: Pivots negative.
ETFs:
XLF (Financials) Closed under the 50 DMA, bringing this into an unconfirmed warning phase.
SMH (Semiconductors) Gapped under the 50 DMA and is now in an unconfirmed warning phase.
XRT (Retail) Gapped below recent support but, is holding the upward sloping 50 DMA.
IYT (Transportation) Closed under the 50 DMA. Now in an unconfirmed warning phase.
IBB (Biotechnology) Gapped below recent support but, is holding the upward sloping 50 DMA.
IYR (Real Estate) Watch for 62.70 to hold. Testing the June lows.
XHB (Homebuilders) Fared well with TBT dropping. Accumulation day in volume. Watch for the 200 DMA to hold.
GLD Great move today! Accumulation day in volume.
USO (US Oil Fund) Grinding higher. 38.41 is the next hurdle.
OIH (Oil Services) Closed under the 10 DMA, but held recent lows.
XLE (Energy) Gapped lower this morning but, holding the 50 DMA.
TBT (Ultrashort Lehman 20+ Year Treasuries) Gapped higher, then corrected to R2 and closed near the opening price. Closed at new yearly highs.
UUP (Dollar Bull) Watch for 21.86 to hold.
EWG (Germany) Subscribers: Gapped lower but climbed back to close above the 10 DMA.
SGG (Sugar) Subscribers: Holding the top of the channel.
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:
NBR Holding 3 converging moving averages. Watch for a breakout or reversal against the 50 DMA.
IACI Holding the converging 10 and 50 DMAs. Watch for a breakout or reversal over R1.
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)
NOW Confirmed Bullish phase. Watch for a reversal or breakout against the 10 DMA.
CME Held up very well and closed above the 50 DMA to bring this into an unconfirmed warning phase. Recently over the 80 monthly. Watch for a breakout or reversal against the 50 DMA.
EL Unconfirmed Bullish Phase, holding the 50 DMA. Watch for a breakout or reversal against the 50 DMA.
SWC Cleared the 200 DMA today. Watch for a breakout or reversal against the 200.
Category 4: (Rip Tide) N/A
Phase Change:
CBI Confirmed the bullish phase. Watch for a breakout or reversal against the 50 DMA. 59.47 needs to hold.
Other:
SLB Watch for an opening range reversal or breakout against the 10 DMA. Today’s high and R1 line up and they need to clear.
HLF Inside day. Today’s low must hold and today’s high must clear.
WDAY Watch for a breakout or reversal against the 10 DMA. 73.25 is max risk.
Shorts:
Category 5: Titanic-Bear Phase, Negative pivots, not oversold, Risk R1 or previous day high. Target: Day to swing
MPC Watch for a breakdown or OR high failure under 70.50. 72.45 must not clear.
PSX Could see a drop to 54.80. Watch for a breakdown or reversal under today’s low.
FRAN Watch for a breakdown or reversal under today’s low. Today’s high is max risk.
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 lows
AWAY Broke the 50 and the 10 DMA today. Watch for a breakdown or reversal under today’s low and against the moving averages.
Best wishes for your trading,
Geoff & Matt
