Four doji’s pretty much sums up the market today – undecided. SPY, DIA, QQQ, and IWM all opened higher, tried to continue and then fell back to test prior day’s support levels.
While the indecisive intra-day price action may not have been easy for day traders looking for a trend day in the indexes, the daily trend is still decisively up. All four indexes closed up and intra-day weakness held expected support of the low of the day or the high of the prior day.
While the media is focused on the S&P breaking and holding above 2000, I think the more important question is, will the IWM hold today’s low and move higher after breaking 115.80? But I understand that’s not nearly as interesting to the average TV viewer and a big round number like 2000.
There were some nice trending areas in the market today and they should not come as any surprise to readers of this page. The Oil & Gas group, as traded with the XOP ETF had a nice 2% trend up day. Biotech, IBB, also broke out and ran up over 2% and closed on the highs, but you had to be quick as the opportunity was in the first few minutes of the day or you missed it.
The last week in August is like the last week of the year - pick your day trades carefully, and give your swing trades room to chop around and ride the bullish bias.
S&P 500 (SPY) - A day of rest and pretty tight consolidation may be all it needs for another move higher, but I'd be more inclined to buy individual stocks than this index until it consolidates or tests the 198.00-198.50 area. Tomorrow the 199.70 and 199 levels should be good support
Russell 2000 (IWM) - Thought it cleared the 115.80 level this morning but by the close it wasn't so clear. Look for support at 115.20.
Dow (DIA) - very close to the 171.32 high but still unable to break it.
Nasdaq (QQQ) - Has not broken its prior day low in 9 sessions. If it does, 99.00 to 98.70 is the area of support to watch
XLF (Financials) - Nice up day but not much to trade off of up here. Should hold the 23 level if it retraces.
KRE (Regional Banks) - Big resistance at 39.30 including the 200 DMA.
SMH (Semiconductors) - Big engulfing and bearish key reversal day. Key level to hold is 50.80. If that breaks it could be a bearish sign for the market.
IYT (Transportation) - Has 5 days of consolidation. 152.40 is the number it needs to breakout of on the upside. If it slides under yesterday's low, look for major support at 149
IBB (Biotechnology) - Gapped up and ran. The 2014 highs are at 275.40. Look for support tomorrow in the area of 270 to 268.60.
XRT (Retail) - Traded with the market but a close above 89 is a major breakout (after moving up to far too fast however).
IYR (Real Estate) - Sitting on a good support from 73.50-.30, but also one of the weakest performers today.
ITB (US Home Construction) - Broke out of nice consolidation at the 200 DMA but then after big volume at the high of the day it retraced all the way to the low of the daily consolidation. 23.75 is the key low level to hold.
GLD (Gold) - Very tight inside day. I've had my eye on the 123-122 level for weeks.
XME (Metals and Mining) - Heavy today, but holding 43 level.. I'm watching this closely. The weekly picture is still explosive.
USO (US Oil Fund) - Tight inside day. Look at a weekly chart of closes and you'll see it sits on a trend line that goes back to April 2013. If you look at weekly lows there is another trend line from the 2012 lows that comes in at 34. Based on last week's daily action it time to start looking at last week's 34.50 area as potentially a low risk trade to pick a major low.
XOP (Oil and Gas Exploration) - Got the big day we've been looking for. Now needs to clear the 78 level and should hold above 76.60.
FCG (First Trust ISE Reserve NatGas) - Nice trend up day out of the inside day. 20.77 is the 200 DMA but 20.90 is the more important level to break.
TAN (Guggenheim Solar Energy) - Broke out of the daily consolidation and looks good, but no clear pattern to trade.
TBT (Ultrashort Lehman 20+ Year Treasuries) - TLT - should hold 116.80. Constructive up day. 117.90 is significant resistance for now.
UUP (Dollar Bull) - Another nice up day but 22 is probably going to be hard to break. I'll be interested when it pulls back to 21.80. The weekly base is very impressive.
EEM (Emerging Markets) -Nice flag moving higher. I'll focus on this tomorrow.
IFN (India Fund Inc.) - Just as I said about FIX a couple days ago. It's consolidation is getting old. It needs to break 26 soon or lookout below. Keep an eye on it.
EWW (Mexico) - Inside day. Breakout would be interesting. Must hold 71.
FXI (China Large Cap Fund) -Closed at 41.25 and I was looking at 40.35 as support and 41.15 to be the sign that the bulls are back. Let's see if it can follow through tomorrow
CORN (Corn) - More consolidation.
JO (Coffee) Stuck in the middle of the range is 34.46 to 36.80.
* * * * * Picks * * * * *
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:
KMX – I've been looking for a breakout but its been channeling higher, so I'm more inclined now to buy an ORR where I can risk to under 51.
IFN - Five days of consolidation at a key level of 26. Looking for a break of 26 and a stop under 25.80 or 25.65 for a swing trade.
AMGN - Broke out of high tight flag. I'd like to buy a reversal at 134 with a risk under 133.
CTXS - 70.25 is still a big swing number. Looking for a trade over that number but also with that number in the stop.
TWTR - Looking for an ORR against 40.70
EEM - Max risk 44.50, but 44.80 is a good level to risk too.
HOT - Looking for breakout over 84.60 daily consolidation
Category 2: (Pipeline) N/A
Category 3: (Double Up) Positive Phase, Condition 1 through 4, Positive Pivots which means can either buy a opening range breakout or candidate for Opening Range Reversal, with Risk below 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)
ITB- Might consider if can risk under 23.75. Must be over 23.86
SODA - Like a trade with stop under 33.30.
Category 4: (Rip Tide)
Phase Change:
NBL - Unconfirmed accumulation phase. Prefer ORR with 70 in the stop.
TWC - Unconfirmed bull phase. Max risk 147, and I'd like to have that in my stop.
Shorts:
Category 5: (Titanic) Bear Phase, Negative pivots, not oversold, Risk R1 or previous day high. Target: Day to swing
LVS - Max risk 69.70.
CB - Max risk 91.20
Category 6: (White Cap)
N/A
Best Best wishes for your trading,
Geoff Bysshe
President
MarketGauge
Filling in for...
Michele Schneider
