The Market Rarely Pleases Everyone For Very Long
The market action today offered something for everyone. The bears got a 3rd down day in the SPY, and the bulls got rewarded for buying the pullback in the Q’s to the 10 DMA.
In a very healthy bull move, a 3 day retreat to support would be enough for the bulls to resume the upward momentum with a nice big up move very soon. The long term trend is still bullish, but in recent weeks the markets have demonstrated that the bulls’ momentum is slowing down.
If the bulls rush in, I would join in cautiously, but I’ll be very selective. The next big buying opportunity will come when the market has had more time to flush out the weak longs. Three down days into support has not done that.
All the markets are sitting in good support, which may slow a decline, but I would not count on it to prevent further declines. Therefore, I’ll remain cautious on weakness. I don’t think it’s time to pick the bottom in this correction (if I can call it that).
S&P 500 (SPY) Key level for bulls is today’s high which lines up with the 10 DMA. If it breaks lower look for support at 167.50
Russell 2000 (IWM) Very heavy today. Key level to break before looking to the long side it today’s high. Important support at 103.
Dow (DIA) Key level to watch for resistance in a rally is 156.25. In a decline look for support at 153.67.
Nasdaq (QQQ) Thishas been the leader and still looks the best if you are looking for a long. 76.25 could prove to be interesting support if it lines up with an OR low. Watch 77.00 for resistance.
ETFs:
XLF (Financials) Support at 5/22 high at 20.35.
SMH (Semiconductors) Holding the support at 38.20. However, it closed under the 50 DMA bringing this into an unconfirmed warning phase.
XRT (Retail) Back into the previously mentioned channel. Under the 10 DMA.
IYT (Transportation) Under the 10 DMA and outside of the candle from 8/1.
IBB (Biotechnology) Holding moderate support level around 195.00.
IYR (Real Estate) Bear phase now after last week’s death cross. Continuing its downward slide. Very oversold now.
XHB (Homebuilders) Confirmed its warning phase.
GLD 123.55 is offering some support. Sideways trading today.
USO (US Oil Fund) The topping candle from 7/19 remains intact. Could not clear the 10 DMA.
OIH (Oil Services) Tested and held support at 44.70 area.
XOP (Oil and Gas Exploration) Broke the 10 DMA. Needs to clear 63.31.
TBT (Ultrashort Lehman 20+ Year Treasuries) Gapped lower and closed under the 10 DMA.
UUP (Dollar Bull) Lowest level since June. Holding the June lows.
FXI (China) Subscribers: Unconfirmed Bearish phase.
EWW (Mexico) Subscribers: Watch for this to clear the 200 DMA.
SGG (Sugar) Subscribers: Broke out of yesterday’s inside day and cleared the 50 DMA, bringing this into an unconfirmed recovery 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:
OI Corrected to and held the 10 DMA. Needs to clear R1. 29.37 risk. Holding the 80 monthly.
JNJ Corrected down to the ten and looks compressed. R1 needs to clear. 93.40 risk.
CBS Inside day. Corrected to the ten and held. Needs to clear today’s high and hold today’s low.
LNC Corrected to the 10 DMA and holding. Needs to clear R1 and hold the 10.
OCN Inside day. Needs to clear today’s high and hold today’s low.
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)
ASH Inside day. Needs to clear today’s high and break today’s low.
MMM Watch for breakout or an ORR against the 10 DMA. Corrected and held up well today.
Category 4: (Rip Tide) N/A
Phase Change and/or Slingshot Lows:
TXN I like this over today’s high, which lines up with R1. 39.30 max risk.
PEP Inside day and held the 10 DMA. Needs to clear today’s high, which lines up with R1. Risk to today’s low.
MCK Very compressed with twoinside days. Holding the 10 DMA. Needs to clear 123.70 and hold today’s low.
UTX Improved in condition. Watch for a breakout or reversal against the 10 DMA. Today’s low must hold.
K Inside day with good support on the 50 DMA. 65.77 and R1 needs to clear. The 50 DMA is max risk.
Shorts:
Category 5: Titanic-Bear Phase, Negative pivots, not oversold, Risk R1 or previous day high. Target: Day to swing
NFX Three converging moving averages are overhead resistance. A breakdown or OR high failure below 24 is good to short. 24.31 good risk.
NTI Under the downward sloping 50 and 10 DMAs. Needs to break 23.79. Can see July lows.
Category 6: N/A
Best wishes for your trading,
Geoff & Matt
