This is beginning to look better! However, my guard is still up and we can’t get complacent. The indexeshave held up well since Tuesday’s alarming drop, and are beginning to test higher levels. The Russell 2000 (IWM) and the S&P 500 (SPY) cleared the key levels that I have been writing about since Tuesday. However, SPY was not able to close over 64.19, a recent swing low, even though it traded above this level for much of the day. I will keep an eye on this level tomorrow. IWM needed to clear the 50 DMA. It did so, and closed above it. Nasdaq (QQQ) broke out of its inside day and closed above the 10 DMA. TheDow Jones Industrial Average (DIA) is still the weakest of the four major indexes. It’s next obstacle is 148.50. The market tomorrow will likely be low volume chop, as it is a Friday heading into a holiday weekend. I will focus on trades with high volume to avoid being caught up in the choppiness.
S&P 500 (SPY) Watch for 164.19 to clear and today’s low to hold. Tested and retreated from the 10 DMA Subscribers: Pivots positive.
Russell 2000 (IWM) Closed above the 50 DMA to bring it into an unconfirmed warning phase. Subscribers: Pivots positive.
Dow (DIA) Watch for 148.50 to clear. That level is a swing low from 8/21 and is an important level to clear. Subscribers: Pivots positive.
Nasdaq (QQQ) Broke out of its inside day. Cleared and closed above the 10 DMA. Subscribers: Pivots positive.
ETFs:
XLF (Financials) Watch for today’s low to hold.
SMH (Semiconductors) Climbed back into the range of the consolidation before it gapped down. Watch for the 10 DMA to hold.
XRT (Retail) 78.90 is an important area to clear. It lines up with swing highs from June and the 10 DMA.
IYT (Transportation) Watch for today’s low to hold and the converging 10 and 50 DMAs to clear.
IBB (Biotechnology) Moving strongly. 198.46 is next resistance.
IYR (Real Estate) Holding the downward sloping 10 DMA.
XHB (Homebuilders) Closed under the 200 DMA, after trading above it for most of the day.
GLDTested support at 135.45. Broke down from its inside day.
USO (US Oil Fund)Closed on support from the July high.
OIH (Oil Services)Inside day, after yesterday’s impressive move. Holding the 10 DMA.
XLE (Energy) Inside day, holding the 50 DMA.
XOP (Oil and Gas Exploration) Inside day. Watch how the range breaks.
TBT (Ultrashort Lehman 20+ Year Treasuries) Holding the upward sloping 50 DMA. 78.63 is resistance.
UUP (Dollar Bull) Gapped higher and could not clear the 200 DMA.
EWG (Germany) Subscribers: Now in an unconfirmed warning phase.
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:
DLTR Tested and held the upward sloping 50 DMA. Watch for a breakout or reversal over R1.
ROST Corrected to and is holding the 10 DMA. Watch for a breakout or reversal only if it is above 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)
ALXN Holding the converging 10 and 50 DMAs. A reversal to control risk is best. A breakout with good volume and risk is okay too.
CRM Watch for a breakout or reversal against the 10 DMA.
ETE Watch for a reversal or breakout over the 10 DMA
NFLX Watch for a breakout or reversal over 289.94, with good volume and risk.
Category 4: (Rip Tide) N/A
Phase Change:
SRE Inside Day holding the 10 DMA and the swing high in June. Buy ONLY if it clears the 50 DMA and today’s high. Today’s low must hold.
LM Moved into an unconfirmed bull phase today. Watch for a breakout or reversal against the converging 10 and 50 DMA.
Other:
DDD Buy a breakout or reversal only over 54.08.
RAX Watch for a breakout or reversal only above 45.41.
CBST Tested and held the 10 DMA. Watch for a breakout or reversal.
CLR Holding the upward sloping 10 DMA. Inside day. Today’s high must clear and today’s low must hold.
ACAD Tested and held the 10 DMA. Watch for a breakout or reversal.
LYV Inside day above the upward sloping 50 DMA. If today’s high clears, it will also clear the 10 DMA. Today’s low must hold.
Shorts:
Category 5: Titanic-Bear Phase, Negative pivots, not oversold, Risk R1 or previous day high. Target: Day to swing
MPW Watch or a breakdown or reversal under the 10 DMA.
NBR Inside day in a unconfirmed bear phase. Today’s low and the 50 DMA MUST break and today’s high MUST hold.
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
NFX Watch for a breakdown or OR high failure under the 10 DMA.
Best wishes for your trading,
Geoff & Matt
