Tuesday night I wrote, “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..”
Is the market that sick? All the internals have indeed turned negative, but we have been there before. The S&P 500 failed 204, a key area of support. IWM or small caps, managed the inside day, which of course is not surprising considering the huge range it had on Tuesday. NASDAQ held Tuesday’s lows also establishing an inside day.
It was DIA I found troubling after it could not close above Monday’s low on Tuesday while confirming a topping candle. DIA, although the uptrend remains intact, has the best support a bit lower at the 173.50 area.
Public perception of low Treasury bond rates has totally wavered between a Dr. Jekyll/Mr. Hyde scenario. When the market has turned down over recent years, the FED easing and pumping became adrenaline for equities. However, we have seen (and are currently witnessing) the reverse. At certain junctures, low rates present more insidiously, suggesting a flight to safety and waning confidence in what the “robust” economic data has suggested.
Therefore, easiest advice is use the inside day rule I have written about repeatedly. In IWM and QQQs, follow up or follow down. In the IWM, the range break to the lows suggests a Mr. Hyde metamorphosis to the 200 DMA at least. In QQQs, a break of 103.04 brings it to 102, maybe even 101. Flipside, Dr. Jekyll emerges!
S&P 500 (SPY) Starting to look a lot like September instead of Christmas. That will change if this can clear over 205. Subscribers: Negative pivots in all
Russell 2000 (IWM) 114.27 is the 200 DMA. 117.05 pivotal and much better looking
Dow (DIA) A good bloodletting, could have more. Seems selling rallies makes sense until this sees 178 again
Nasdaq (QQQ) Above are the numbers we could see to the downside. What would reverse that is a move over 105.20
XLF (Financials) 24.55 pivotal at the fast moving average.
KRE (Regional Banks) Here we go again testing the major moving averages.
SMH (Semiconductors) Some support at 54.00
IYT (Transportation) Attempted to fill a gap from Monday but still could not. Vote for first one to reach the 50 DMA below
IBB (Biotechnology) Inside day which makes this another group to watch for the range break
XRT (Retail) This could give IYT a neck and neck finish to the 50 DMA below.
IYR (Real Estate) 2 inside days near the highs and outperformed-good one to watch
GLD (Gold Trust) Narrow range inside day, which suggests it remains friendly near term unless it crack under 115.75
GDX (Gold Miners) Unconfirmed phase change back to bearish. Over 20.00 on a close looks good
USO (US Oil Fund) Really oversold now on all timeframes. But we need evidence of bottoming action
XOP (Oil and Gas Exploration) Of all the energy related ETFs, this one at least held the lows from Monday and Tuesday on a closing basis. I’m taking probiotics, perhaps this is as well
TBT (Ultrashort Lehman 20+ Year Treasuries) TLTs At this point, we could see some consolidation, which would be a relief for the market I would assume
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: N/A
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)
SWKS Held the 10 DMA at 67.75 and outperformed. Like this over 70.02 R1 risk the 10 DMA for swing
DAL Positive Pivots, held the 10 DMA and outperformed. If holds 45.77 then like over 46.54 the pivots for a miniswing
EQIX 227.95 is the 10 DMA to hold with 231.34 R1 to clear for a mini
FFIV Today’s low and the 10 DMA line up and are max risk. Then 131.65 the pivots have to clear for a day to mini-longer term this is considered part of a growth area
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:
M Oversold held S1 and has positive pivots. Now, need a move over 61.07 to begin with and a risk of tomorrow S1 60.13 for a day to miniswing
Phase Change:
SFM Although it closed under the 50 DMA, it outperformed the market. Therefore, today’s high lines up with R1 and the 50 DMA giving this a good risk to 29.75
GT Over 27.14 with risk to today’s low, you have a good miniswing type trade
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 72.00 now good resistance to sell against
NFLX Inside day under the 10 DMA risk 348.25 and looks like this could still go much lower
TRIP 74.42 major resistance and this still looks very weak under all major moving averages
GOOG Neutral pivots so has to break 522.30 S1. If this eventually breaks 500, it is a major monthly breakdown
Category 6: N/A
Best Best wishes for your trading,
Michele Schneider
