As lots of damage was done last week, coming into this week, there were many reasons to expect therelief rally that Monday brought forth.
First, on a short-term basis, the relative strength indicators showed oversold conditions. Secondly, the Russell 2000s held above May lows while the QQQs never broke down the 50 DMA, maintaining the bullish phase. Third, the volume last Thursday and Friday registered 2-3 times the daily average, thereby pointing towards the possible “blow-off.
What I do like now, is the possible reversal candle in the small caps (IWM) posted during Monday’s session-the new 60-day low, close on the highs type of reversal candle! That, plus the unconfirmed return to a bullish phase in Semiconductors, and the firming of the rates on an “up” day. This could add up to some fine setups for Tuesday should the market confirm that this isn’t just a one day wonder or relief rally.
Since the Dow closed down for the year last week, it seems that watching how DIA acts around 166 on Tuesday might be further elucidating. For now, we can at least say that the Dow is back to slightly up for the year.
One caveat even with all the potential positives-once phases begin a cycle of deterioration, they tend to continue to deteriorate. Therefore, note the market tone which continues to suggest delta neutral, at least until that indicator changes.
S&P 500 (SPY) A possible reversal candle here with a lot of resistance overhead at 195.50Subscribers: Positive Pivots in all
Russell 2000 (IWM) This had a reversal but did not clear R1-threfore, 112.32 next hurdle then we can looks at the 200 DMA
Dow (DIA) Marginally up for the year with 166-167 major resistance
Nasdaq (QQQ) Not surprising to see this strongest-now, has to hold 94.65 and see what it has at last Thursday high 96.34
XLF (Financials) Inside day-good piece of the puzzle depending on the way the range breaks
SMH (Semiconductors) Unconfirmed bullish phase if holds 49.00 area
IYT (Transportation) Inside day
IBB (Biotechnology) Inside day back over the 50 DMA for an Unconfirmed bullish phase
XRT (Retail) Closed just shy of the 200 DMA after testing it
ITB (US Home Construction) The weakest with possible reversal candle but lighter than average daily volume
GLD Best I can say here is that the moving averages are getting ready to converge
USO (US Oil Fund) Subscribers: Brick wall bottom over the 200 DMA which is now the risk point to hold
OIH (Oil Services) Reversed but there is the overhead double top as well
XOP (Oil and Gas Exploration) One of the stronger performers off the 200 DMA
FCG (First Trust ISE Reserve NatGas) Subscribers: Extremely interested in this brick wall bottom potential back over the 200 DMA
TBT (Ultrashort Lehman 20+ Year Treasuries) Inside day in the TBTs sitting over the fast moving average Subscribers: R1 tomorrow is 59.27 with todays low a good risk
EWW (Mexico) Subscribers: Great pop over R1 today
FXI (China Large Cap Fund) Subscribers: 40.10 now the key support
CORN (Corn) Subscribers: If this is bottoming, then we can wait to see if it clears 26.60
BAL (Cotton) Subscribers: Possible brick wall
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)N/A
Category 2: (Pipeline) N/A
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)
CTRP Cleared back over the 10 DMA-see more day to miniswing if holds 63.20
*XRX Inside day on the 10 DMA-13.21 has to clear with good risk now to 12.98
*INTC Light volume rally so now, like the risk to recent lows and the 10 DMA is 34.22 to clear
*HPQ Like this longer term therefore watching to see how it holds 35 and if can clear R1 35.52
*JWN Reports August 14th. Check out the May 16th bar-we have to break that range one way or another then follow
*COST 118.65 is R1 and 118.55 last week’s high to clear with the risk now 117 for a swing
*KMX Inside day on the 10 DMA-good over 50.95 with risk to today’s low for a miniswing trade and if want a swing have to risk to 49.00 the 50 DMA
HCA Inside day and great setup near highs for a day to miniswing trade should this take out 66.50
Category 4: (Rip Tide)N/A
Phase Change:
*GLPI Back into the channel and over the 50 DMA 34.19-like over today’s high for a new swing trade
*ODP Reports before the open-4.91 max risk and now won’t touch until it clears the 50 DMA
WMT Reports August 14th. A Mish special-sitting on a major trendline with a possible slingshot super oversold-over 73.77 good risk to today’s low for a miniswing to hybrid swing trade
Shorts:
Category 5: Titanic-Bear Phase, Negative pivots, not oversold, Risk R1 or previous day high. Target: Day to swing
RTN Inside in its distribution phase. Risk 92.85 like under todays low
NFLX If we use 429 as risk then if it takes out today’s lows, should see 415 or lower
Category 6: White Cap-N/A
