Many of my readers have attended at least one of the webinars we do on market phases. I begin each one the same way-talking about the cycle of EVERYTHING in nature, including the markets. I further comment that not understanding phases and what phase the instrument you are trading is in is like driving without a map or navigation system.
After a solid run in a bull phase with short periods in and around that phase, this now confirmedwarning phase in the SPY and DIA, coupled with the Distribution phase in IWM does look more like the tipping point for further deterioration in that cycle.
Only NASDAQ with its solid hold of the 50 DMA and the bullish phase keeps that distinct possibility at bay. One other note is volume-typically on blow offs, you see double and triple the daily average volume. Such is the case last Thursday and Friday in all indices, particularly the SPY and QQQs.
What that suggests to me is 2 distinct possibilities at play-either NASDAQ joins the others in further weakening since the volume suggests more of a running for the exits rather than huge short bets, or, theQQQs are telling us that the better economic stats we saw last week are just part of a great rotationwith a stronger dollar, firmer rates, which will lead us to have only tested the May lows in the IWMwith now a new and wider trading range as we head into a much choppier August.
Regardless, we will know soon enough and while we wait for that clarity, market tone says delta neutral with no real edge to holding major swing trades long or short.
S&P 500 (SPY) 2 big volume days and confirmed warning phase. Now, has not filled the runaway gap so that’s noteworthy Subscribers: Negative Pivots in all
Russell 2000 (IWM) Landed on key weekly moving average support-might see short covering, but lots of damage done
Dow (DIA) Officially down on the year and way oversold
Nasdaq (QQQ) 93.80 is the 50 DMA (Friday’s low 94.04) 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
SMH (Semiconductors) Closed green which is no surprise considering this is the top place to look since it is resting on the 50 DMA, 48.94 and ended the week with an inside day.
IBB (Biotechnology) Sitting just under the 50 DMA
XRT (Retail) In terms of distance from the 200 DMA, this too is close
GLD Gapped over the major moving averages on Friday after gapping lower on Thursday-confused little metal
USO (US Oil Fund) Subscribers: Just missed an official slingshot low but did see the move back over the 200 DMA from the lows. Keep watching
XOP (Oil and Gas Exploration) 72.16 the 200 DMA which could turn out a gift as fas as a low risk buy is concerned
TBT (Ultrashort Lehman 20+ Year Treasuries) TLTs remain above the 50 DMA even with the taper-flight to safety which is kinda weird since firming rates getting blamed for correction-so probably temporary
EWW (Mexico) Subscribers: Inside day on the 50 DMA-watch over R1
FXI (China Large Cap Fund) Subscribers: 39.85 the 10 DMA to hold
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:
*CTRP Inside day after the bounce off the 50 DMA with R1 64.39 and risk 60.25
GMCR Reports 8/6 Great daytrade to mini for Monday if takes out R1
Category 2: (Pipeline) Positive Phase, Condition 2-3, 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:
*INTC Has to hold 33.21 and clear 34.03 Friday high to get back in gear.
*HPQ Over R1 35.47 is better if this holds 34.21 the 50 DMA
*JWN Reports August 14th. Has to hold Friday’s low and clear Friday’s highs which lines up with R1
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)
*COST 117.70 max risk with an inside day. 118.34 has to clear
*KMX Made it’s whole range in the first 30 minutes on Friday-. Friday’s low good support now if this is good
HCA Miniswing trade with risk to 63.55 and has recent high to clear 66.71 for another leg up
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:
*JBLU Great bounce off the 50 DMA now risk 10.50 if clears R1 10.96
*FCX 36.30 is the 50 DMA way oversold and looking like it might want to pierce the 200 weekly moving average while its holding above the 80 monthly. Has to clear R1 and Friday high
Phase Change:
*GLPI Inside under the channel which means over R1 is good and Thursdays high 35.02 good with risk to 33.44
*ODP I still really like this one especially if Friday’s potential slingshot low confirms over 5.07 which clears the 200 DMA for a risk to Friday’s low 4.91
*GE Possible slingshot if confirms over 25.55 with risk to 24.75
Shorts:
Category 5: Titanic-Bear Phase, Negative pivots, not oversold, Risk R1 or previous day high. Target: Day to swing
NFLX confirmed phase change to warning. Risk 431.28 R1
APC 107 now the 50 DMA overhead resistance. Under 105 weak
*PSX confirmed phase change to warning with 81.51 the 10 DMA resistance .
Category 6: White Cap-N/A
