I’m so excited since after giving you a head’s up to follow the range break of theinside days in both IWM and QQQs, the market has given us a gift-2 INSIDE DAYS!!! (Well, technically not quite in QQQs since it took out Wednesday’s high by one tick.)
However, even more powerful than one inside day, two inside days should be statistically more reliable vis-à-vis following the range break up or down.
I also wrote about public perception of low Treasury bond rates and how it wavers between a Dr. Jekyll/Mr. Hyde scenario. If you followed the TLTs on Thursday, as the rates firmed a tad, the Dow climbed over 200 points. As the rates fell, the market gave back 110 of those points. Finally by end of day, the rates dropped further with TLTs making new intraday highs. The market pared its gains even more with the Dow closing up $62.00.
Therefore, seems to me keep it simple. 2 inside days-keep your eyes on IWMfirst, QQQs second. And, don’t necessarily count on a low volatility, dull Friday. As I have written over and over again this entire year, throw out most conventional wisdom, (December is strong with super low volatility) and thinkThe Year of the Contrarian Horse. December could easily remain weak with continued high volatility (last 2 days volatility jumped 20%). At least until we begin counting sheep on the next Chinese New Year.
S&P 500 (SPY) 206.73 is the overhead 10 DMA to pierce for this to get exciting. Otherwise, not quite the inside day as IWM had, but, under Wednesday’s low, trouble ahead. Subscribers: Positive pivots in all
Russell 2000 (IWM) After 2 inside days, if breaks lows see 200 DMA pretty readily. If holds and clears 118, great sign
Dow (DIA) 178.12 area to clear or looks like SPY-under Wednesday low, the 50 DMA looks like next landing place
Nasdaq (QQQ) A move over 105.06 positive. Under 103.59 vulnerable and under 103.04 not pretty
XLF (Financials) 24.55 held Thursday and remains pivotal at the fast moving average.
KRE (Regional Banks) Inside day above the 200 DMA
SMH (Semiconductors) Support at 54.00 and over 55.55 much better
IYT (Transportation) Still has not filled a gap from Monday. Vote for first one to reach the 50 DMA below
IBB (Biotechnology) 2 Inside days here too-now that’s special!
XRT (Retail) Couldn’t quite make the hold over 92.50. Now, either gets there again and holds or vulnerable
IYR (Real Estate) Quiet but firm
ITB (US Home Construction) Not an impressive candle with its inside day
GLD (Gold Trust) Friendly near term unless it cracks under 115.75
GDX (Gold Miners) Confirmed phase change back to bearish.
USO (US Oil Fund) Really oversold on all timeframes. So what for now.
XOP (Oil and Gas Exploration) Didn’t make a new low, but did make a new low close
TBT (Ultrashort Lehman 20+ Year Treasuries) TLTs 123 now near term support
CORN (Corn) Subscribers: Worth watching over 27.00
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:
PNC Inside day and on the 10 DMA making max risk 88.64 and needs to clear the pivots then R1 89.79 for mini to swing
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)
AVGO Inside day and although it has had 2 days under the pivots, tomorrow pivots look positive. Risk is 97.50 and like over 103.50 for a swing risk
SWKS Held the 10 DMA at 68.04 and outperformed. Like this over 71.34 for a miniswing
NOC Inside day. Has to hold 142.82 for risk then clear 147.45 to look like its flagging higher
EQIX We got in late so didn’t keep. Now, an ORR probably best against 228.25 unless this gaps higher
FFIV Short of an inside day by one tick. Like over 133.71 risk for swing is 130.60
IR Improved in condition with today’s low a good miniswing risk if holds over 63.05
UPS If holds 110.06 and clears 111.57 todays’ highs could see more upside for a miniswing trade
MAS Like over 25.00 with risk to 24.46 for a swing trade risk
Category 4: N/A
Phase Change:
GT Risk 26.90 and like better over 27.20 for a miniswing
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
UNP Inside day and like the break of S1 or under 112.98 for a swing short stop can be moved quickly if closes over the 50 DMA
TSLA 2 Inside days near the lows
NFLX Weak close after better start and under the 10 DMA risk 346.77 and looks like this could still go much lower
TRIP Inside day with 74.48 major resistance and this still looks very weak under all major moving averages
Category 6:N/A
Best Best wishes for your trading,
Michele Schneider
