Hard to say whether the market hit bottom from its two day indigestion or whether Tuesday's session will turn out as more of a respite or “a market in denial” which now might really become that sick after counting on always having robust health for the last several years. Trust me, I can relate!
Doubtful we are in for any major disasters now given the small caps or Russell 2000s spectacular show of how it can trade nearly the entire range of the last 5 weeks in just one sleepy day in December, with only 16 more shopping days left until Christmas. Ho ho ho!
Generally speaking, when an instrument in a bull phase gaps lower then proceeds to turn around, rallying above the previous day’s lows, that is a low risk signal to buy. That transpired in a lot of equities, but notably, happened really early on in the session in IWM (and against the 200 DMA support too) as well as inNASDAQ, SPY but not in DIA until the last 5 minutes of the day, which ultimately could not sustain.
Therefore, for Wednesday, look for follow through in the small capsparticularly. They still have to clear 118.75 to break the highs of the recent range. Otherwise, we can safely say that SPY and QQQs did not confirm reversal candles from their new highs while DIA remains suspect not closing above 177.97 the previous day low.
One other note-the metals and miners I wrote should be a focus for Tuesday’s session-instant gratification, thank you very much!
S&P 500 (SPY) Broke the 204 support marginally then turned around to close above Monday’s low. That does negate the reversal candle but unless it clears back over 207.20, could still be in correction mode. Subscribers: Negative pivots in all except IWM
Russell 2000 (IWM) This now has such a huge range-an inside day is the best bet. But, I wouldn’t discount the possibility of a run to 118.75 so fast either
Dow (DIA) Although it held support from mid-November, it also failed to clear Monday’s lows. 178.40 is a good place to renew confidence here
Nasdaq (QQQ) Held on and now we can see if this clears 105.20 or needs some digestion from its digestion and winds up with an inside day
XLF (Financials) Over 25 gets this back in shape
KRE (Regional Banks) Over 41.20 this takes out work that goes back from July.
SMH (Semiconductors) Did not confirm the reversal candle for same reason that SPY did not
IYT (Transportation) Gapped lower and did not fill that gap-still weak til that happens
IBB (Biotechnology) Hats off to this group!
XRT (Retail) If this finished the correction today, which is possible, then we need to see it clear 93.00
IYR (Real Estate) A prime example of what I describe in the 3rd paragraph of the text.
ITB (US Home Construction) Held 25.00 so far
GLD (Gold Trust) Confirmed phase change back to recovery-and closed up over 2%
GDX (Gold Miners) Unconfirmed phase change back to recovery. Over 20.00 looks good
USO (US Oil Fund) Only pattern that would excite me now is an island bottom if happens
OIH (Oil Services) Possible reversal from the lows if confirms
XLE (Energy) Same as OIH
XOP (Oil and Gas Exploration) Ditto to OIH
TAN (Guggenheim Solar Energy) Subscribers: I like the hold on the monthly low. Might consider ½ position over R1 and then add over the 10 DMA for a swing
TBT (Ultrashort Lehman 20+ Year Treasuries) TLTs got the close above 122.85 on a gap higher124.13 next hurdle and a break of 121.44 would put some pressure on this
CORN (Corn) Subscribers: Inside day above the 10 DMA
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:
SWKS Cleared the 10 DMA for a condition change and now has to clear the pivots then R1 70.80 for a day to mini
Category 2: N/A
Category 3: (Double Up) Positive Phase, Condition 1 through 4, Positive Pivots which means can either buy an 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)
RTN A good daytrade should this come in and have a 5 minute OR breakout over today’s highs 108.83
LMT Looks good provided it holds 188 and better over 189.90 the 10 DMA. R1 is 191.54.
ETR Waffled around but still looks good over 84.00
ODP Made a big move with now lots of overhead resistance. However, 6.48 if holds is a good sign
PG Has negative pivots but still looks good if holds 88.92 the 10 DMA
Category 4: N/A
Phase Change:
WAG Great move off the 200 DMA and now, with follow through cold see 72 or higher for a swing
SFM Thought I forgot about this one? It cleared the 50 DMA for an unconfirmed phase change to recovery. Now, today’s low good risk and like to see this clear 30.54 R1
EXPE The only one I’m regret not buying today. It touched the 10 DMA and moved higher. Now, rules say wait til it clears R1 91.70 looking for move to 101 possibly
GILD Confirmed phase change to bullish. 101.79 is the faraway swing risk, so if looking for a day to mini needs to see this take out R1
CYH confirmed phase change to bullish with an inside day. Like risk to 50.35 and a buy for swing over R1 51.93
PM The 50 DMA is 86.63 to clear but I also like the weekly chart so keep watching
X Like CYH a few weeks ago, a possible slingshot low on the 200 DMA with an unconfirmed phase change. Like if confirms for swing
Shorts: Lots have reversals from the lows so now need to wait for new setups
Category 5: Titanic-Bear Phase, Negative pivots, not oversold, Risk R1 or previous day high. Target: Day to swing
QCOM We have ½ which will we cover if clears the 50 DMA and R1-otherwise, under 72 we will add.
Category 6: N/A
Best Best wishes for your trading,
Michele Schneider
