I wouldn’t call it extraordinary volume, but volume did come in on the S&P 500, Dow and NASDAQ giving them all a distribution day. However, the small caps or Russell 2000s, which tipped us off on this correction, not only held the fast moving average, but after Monday’s decline on decent volume, did not at least post a second distribution day (when the volume exceeds the day prior and the price closes down from the previous closing price). Therefore, as the bullish trend is not at threat of abating currently, one must take this action for what it mostly likely is-a healthy correction. That’s not to say the market will reverse from here and roar to new highs-but, I would be looking for outperformers, especially in certain sectors and groups.
S&P 500 (SPY) After a 2-day correction, today’s high becomes an important area to clear. Subscribers: Negative Pivots in all
Russell 2000 (IWM) 111.60 pivotal
Dow (DIA) After a 2-day correction, today’s high becomes an important area to clear.
Nasdaq (QQQ) Vote for the index most likely to succeed if clears today’s high
XLF (Financials) 21.04 area held and should continue to do so
SMH (Semiconductors) Here is a group to focus on-never ran with the indices to new 2013 highs and still from a longer term perspective, has miles to go
XRT (Retail) Hard to get negative here in December making this another place to look for setups
IYT (Transportation) Doesn’t look done correcting
IBB (Biotechnology) Went from 213 to 225 so a correction midpoint is around 219. Today’s low 220.07
IYR (Real Estate) Not out of the question for a pop if it clears today’s high clears
XHB (Homebuilders) The 50 DMA is key here now
GLD Held up, but not by much. Subscribers: A place to look for a short
USO (US Oil Fund) Textbook island bottom
OIH (Oil Services) In the warning phase, 47.50 has to hold
XLE (Energy) Another group to go to especially since the bull phase is well intact
EWG (Germany) Possible island top if confirms on Wednesday
FCG (First Trust ISE Reserve NatGas) Subscribers: 20.00 pivotal
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 accordingl
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:
BBBY If clears 78.51 R1 area will clear a lot of congestion. It also has to hold 77.00
TXN R1 takes out today’s high with support now at 42.55 the 10 DMA
MCHP Condition 3 oversold with 41.81 the gap low from 10/31 as risk. Like over today’s highs
Category 2: (Pipeline) Positive Phase, Condition 2-3, 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:
P Has slightly positive pivots. Still see a move to 35.00 not outrageous. Risk for now is 27.85 right around S1 and Monday low-then over today’s high clears R1 and the 10 DMA
Category 3: (Double Up) Positive Phase, Condition 1 through 4, Positive Pivots which means can either 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)
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:
BUD As it is holding the 50 DMA and oversold, over today’s high and R1 like the risk to todays low
Phase Change:
HSP Unconfirmed phase change to back to warning but with an inside day. If holds the 50 DMA has a good shot of clearing the 80 monthly moving average later on. For now, has to clear 40.33
LEN A decent swing risk to under today’s low should this clear R1 tomorrow
LULU Inside day on the 50 DMA.Unconfirmed phase change to bullish. If holds 70.55 and clears 72.22 should see pop to 73.50-75.00 area for a miniswing trade
CHK Over 27.22 clears resistance as it flirts with the 80 monthly moving average. Risk is under today’s low
CVX Over today’s high clears back over the 10 DMA with risk 122.00
THC Long today at 42.78 and will raise stop to under today’s low. If clears the 200 DMA 43.47, now we got something!
IGT Held the 10 DMA which will make today’s low a good support area and over R1 17.42 a place to enter-again
Shorts: Watching DOW, QCOR, GLD and TDC
Category 5: Titanic-N/A
Category 6: White Cap-N/A
Bye For Now
