Although the market closed up and on new highs, the salient sectors and groups that drive the economy closed weaker making this recent move very difficult to fall in love with. For example, the financials,semiconductors, transportation, real estate, oil and energy sectors all closed red. Only retail andbiotechnology drove to new highs again, both groups continue to live at the top of the heap. Rates dropped along with the dollar, which means trying to figure out the direction of the market based on that formula (i.e. low rates=strong market) will leave you either on the wrong side or sidelined. Therefore, the best strategy for now is to trade individual instruments each on their own merit and make sure you can step back with a longer term view by noting the phases, risks and potential targets. Otherwise, it’s a scalpers dream!
S&P 500 (SPY) Low volume new highs. No reason to be calling tops if one just looks at how last week ended vis a vis price.Subscribers: pivots positive in all indexes.
Russell 2000 (IWM) Inside day at the new 2013 highs. Always good to watch range breaks on end of week inside day setups
Dow (DIA)Strong looking price action ended the week with this on new highs.
NASDAQ 100 (QQQ) Highest level since 2000 and seemingly on its own fumes
ETFs:
XLF (Financials)Inside day and not yet testing the 2013 high from July 23rd. That candle still suggests topping action until it clears with 20.67 key support to hold
SMH (Semiconductors) After the peak high 7/17, we have a gap overhead and some solid resistance to clear with 38.45 level support to hold
XRT (Retail) Been leading along with biotechnology and one reason that while many hold their breath, going short was not an option either
IYT (Transportation) Inside day at the top of the range from last Thursday which suggests it was just resting on Friday. Has plenty of room to the upside if holds 118
IBB (Biotechnology) my keyboard automatically types out new highs in this group since it has done so many, many times this year
IYR (Real Estate)Might we say a bit oversold now? On the daily relative strength indicator for sure. However, a rally to the 200 DMA may be likely, the key will be to watch for a possible phase change to get excited
XHB (Homebuilders) 31.06 next hurdle and 30.00 key to hold.
GLD 2 Inside days under the 50 DMA Subscribers: Although I scalped and exited, with this setup close eyes on the direction after the inside days here Monday
USO (US Oil Fund)The topping candle from 7/19 remains intact for now with some support at 37.50 now to watch for a hold
OIH (Oil Services)Overhead resistance
XLE (Energy) 84.00 is key
XOP (Oil and Gas Exploration) Another group that has plenty of room for more upside. Inside day Friday.
TBT (Ultrashort Lehman 20+ Year Treasuries) If breaks Friday low probably seals its fate for the short term anyway
UUP (Dollar Bull) Back to a distribution phase unconfirmed
EWG (Germany) Do I hear new 2013 highs soon?
FXI (China) Inside day. 34.50 support in a confirmed recovery phase. Like this over Friday’s high for a move to test the 200 DMA
EWW (Mexico) Subscribers: Got 1.5 ATRs out of this in 2 days and now the 200 DMA is the obstacle to clear
SGG (Sugar) Subscribers: Now, really want to see the 50 DMA hold at 58.23 with support down to 57.93
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
**NOTE: More picks than usual because of my pending vacation-these are stocks I see as best potential whether they set up right away or not and unless they fall apart will be a big focus for the week ahead with Matt and Geoff.
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:
DDD Inside day. As long as 46.50 the 50 DMA holds still like over the Friday’s high and 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)
GCI Slightly negative pivots but 25.90 a good support area. A slow mover but one to watch provided that 10 DMA now holds
ALL Inside day.51.75 good support to hold with a move over 52.40 level reason to believe another leg up
FDX Inside day and a great one to watch with IYT looking strong. To control risk S2 107.94 level is good and if holds 109.50 see room to upside
IP Slightly negative pivots but inside day good risk to 10 DMA 48.56 and after huge move 7/25 showing it could have muscle for a swing
F has to clear recent highs, but if holds Friday’s lows has lots of room even to the 2011 high 18.97
AMZN Inside day. Improved in condition and has to hold the 10 DMA. To control risk look at Friday low to hold and 306 to clear.
GE One slow mover but now over the 10 DMA making 24.30 important
GS Real close to the highs 168.20 with 165.35 max risk
COF Inside day.168.13 R1 if clears is goodalthough it now has to clear 70.00 and hold Friday’s low
WAG Inside day and a favorite setup for this week. Positioned and waiting for 51.35 to clear for next leg up. Like the stop now at 50.57
SHO Improved to a condition 4. Small stock just crossed over the 80 monthly moving average. Holding 12.70 good risk for a long term swing trade if crosses 13.33. In 2006 this was up to 30.00
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:
K Oversold, tested the 50 DMA and held making Friday’s low max risk if this can clear R1 65.78
Phase Change and/or Slingshot Lows:
BEAM Reports Thursday has to clear 66 hold 64.95
MBI confirmed bullish phase and has been consolidating for one month. Over 14 better go or get out under 13.85
MAS 21.60 next obstacle and has to hold 21.25
TCK 23.43 is the max risk now. Like to see follow through here on Monday
Shorts:
Category 5: Titanic-Bear Phase, Negative pivots, not oversold, Risk R1 or previous day high. Target: Day to swing
TPX If loses the 200 DMA under Friday’s low, could be trouble for this stock. For now resistance at 40.45
OXY 90.35 level resistance. See this weakening since 2011 and if stays weak, can eventually break the 80 monthly
PM 89.90 the 50 DMA as risk and under 89.10 could see more downside
CAT Inside day. Resistance at the 50 DMA 84.41. and has to break Friday low S1.
IBM 196.00 now a good risk level. Looking out, if this breaks 186 has room to 170.00
MPC Big move Friday but if cannot clear over the 200 DMA then could see more downside especially looking out under 68.00
Category 6: N/A
Bye for Now!
