Wednesday night I wrote, “Watch Retail, the Financial plus Regional Banking sectors to take the lead. Then, follow that money trail. If they don’t cut it-could be the first “real” sign that the market needs a serious correction.”
Real alright, this is the type of correction that spooks the buy and hold models, thrills the bears and rattles the bulls. But think about this-the SPY is now up 4% on the year and down 3%+ from the peak high at 199. If your performance can boast beating that on both ends, how much up for the year and down from the peak-congratulations-you did an honestly solid job this year!
Moreover, compare your performance to the Dow-that wiped out the gains of the whole year in one session! Outperformers up on year, down from peak, feel better???
However, that’s now. It’s what happens next that matters most. NASDAQ held onto the bullish phase-only one. Anyone who still doubts the predicative nature of the Russell 2000-well, you are a perma bull and that’s all there is to it. By the time NASDAQ reaches its 50 DMA, the others should be so well oversold, opportunities for at the very least, short term buying opportunities will emerge.
I would look at 2 opposite ends of the spectrum-the 2014 leaders like Semiconductors or the ones that are totally beat up yet have reversal patterns on good volume and if possible, against major daily, weekly or monthly moving averages.
Volume was double and nearly triple depending upon the index, the average daily volume-blow offshould not be ruled out either.
S&P 500 (SPY) Not a great way to end a month and 6 months into the year-peak high, close on the month lows. With that said, the runaway gap comes in at 190.95 now super critical support. Unconfirmed phase change to warning, huge volume and way oversold. Subscribers: Negative Pivots in all
Russell 2000 (IWM) Guess we can now call the March 4th and July 1st tops as the double top of 2014.
Dow (DIA) Now exactly on par with the start of 2014-those relationships are so important (DIA and IWM)
Nasdaq (QQQ) 93.70 is the 50 DMA and the place most likely to be somewhat a bottom for the other indices at least temporarily.
XLF (Financials) 22.00 is where this began 2014
KRE (Regional Banks) Didn’t do that badly compared to some other sectors
SMH (Semiconductors) Here is the top place to look since it is resting on the 50 DMA, 48.86
IBB (Biotechnology) Sitting on the 50 DMA
XRT (Retail) In terms of distance from the 200 DMA, this too is close
GLD Gapped under the major moving averages and continued south-big support at 123 level
USO (US Oil Fund) Subscribers: So overdone and near the weekly and daily moving averages-I am watching this for a new entry
TAN (Guggenheim Solar Energy) Subscribers: Terrible day but landed right on the weekly moving average
TBT (Ultrashort Lehman 20+ Year Treasuries) TLTs remain above the 50 DMA
FXI (China Large Cap Fund) Subscribers: Good correction and possible opportunity here
JO (Coffee) Subscribers: Lesson here was July 25th confirmation over the 50 DMA with a tight risk on an opening range reversal
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:
*COST Golden cross with good risk to 116.46 the major moving averages. Has to clear R1
CTRP Great bounce off the 50 DMA and a Nugget-over R1 is 66.09 good for a miniswing risk
GMCR Reports 8/6 Inside day and under the 10 so over 121.68 clears lots of resistance with risk to 118.73 max or tighter since reports next week
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)
*XRX Neutral pivots inside day and risk to the 10 DMA or around 13.00 for a new swing trade
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:
*KMX Today’s low is the perfect risk on the 50 DMA f this it to recover
Phase Change:
DRI Inside day right under the 50 DMA which means over 47.43 clears the 50 DMA with more of a miniswing riskShorts:
Category 5: Titanic-Bear Phase, Negative pivots, not oversold, Risk R1 or previous day high. Target: Day to swing
NFLX Unconfirmed phase change to warning. Risk 430.04 R1
*PSX confirmed phase change to warning with 81.55 the 10 DMA support. Needs to break S1 80.28
Category 6: White Cap-N/A
