Prepared by Geoff Bysshe, President of MarketGauge, filling in for Mish until December 8th
Smelling Salts For The Market
For the last few days the markets have just been waiting for tomorrow’s employment data. I think?
While this will probably be the biggest data day of the month, I’m not entirely sure it will resolve the markets’ schizophrenic stupor. The markets (DIA, SPY, QQQ, and IWM) have been highly uncorrelated intra-day for the last week or so, and this is a sign that there isn’t a lot of conviction in either the bullish or bearish camps.
By ‘uncorrelated intra-day’ action I’m referring to the fact that on many more occasions than is normal, this week one index would be at its low of the day while the others were at their high of the day. This condition does not lead to a trending market.
The result of this indecision has been that the DIA and SPY sit only a fraction of percentage point from where they were 2 weeks ago, and have not moved up or down much since. While the IWM’s range is a little wider, it sits only a fraction of a percentage point from where it closed October!
Given the historic size of the 6-week rally we experienced in the SPY and DIA and QQQ, from the mid October lows, I guess it should be expected that the market would still be a little dizzy and disorientated.
Let’s see if tomorrow’s data serves as smelling salts for either the bulls or the bears.
S&P 500 (SPY) Doji day near the highs. Still consolidating. Subscribers: Negative Pivots in SPY DIA and IWM positive in QQQ
Russell 2000 (IWM) Inside day on the 10 DMA. Held support at 116.22
Dow (DIA) Doji day, held at the 10 DMA during the early morning sell off.
Nasdaq (QQQ) Started the day the strongest, then proceeded to chop for the rest of the time. Still need to clear 106 to show real strength
XLF (Financials) Continued the climb after yesterday’s break out of the recent consolidation for a new high close.
KRE (Regional Banks) Inside day under the 10 DMA
SMH (Semiconductors) A hammer doji at the highs. Still extended, may need a rest.
IYT (Transportation) Held the 10 DMA but looking a little heavy at the moment, and 165 is a big level of resistance.
IBB (Biotechnology) Took a day to rest, which really helped the daily RSI. Still extended on a weekly and monthly level though.
XRT (Retail) Holding recent support at 92.00 and just consolidating
IYR (Real Estate) New 2014 high, but still in consolidation
ITB (US Home Construction) IF this breaks support at 25.00 it is in trouble
GLD (Gold Trust) Held the 50 DMA with an inside day, confirms an accumulation phase, but let’s see it trade higher before we trust it.
GDX (Gold Miners) Inside day, still failed to clear the 50 DMA at 19.90
USO (US Oil Fund) New 2014 low, gas under $2.00 a gallon in some places for the first time in years.
OIH (Oil Services) Consolidating at the lows
XLE (Energy) Not quite ready to make its move.
XOP (Oil and Gas Exploration) New 2014 low close
UNG (US NatGas Fund) New 2014 low close after a nasty sell off
TAN (Guggenheim Solar Energy) Inside day
TBT (Ultrashort Lehman 20+ Year Treasuries) TLTs Closed the gap down from 12/1 with a very strong day
UUP (Dollar Bull) Gapped lower today leaving a baby island top
IFN (India Fund Inc.) Another new 2014 high close but getting very extended
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:
LMT 3 days under pivots sitting right on the 10 DMA at 189.23 needs to hold and confirm over 190.43 R1 with risk to 189.00
BIDU 5 days under pivots and sitting on the 50 DMA as well as being oversold. Needs to hold 228.29 and clear R1 at 233.69 with risk under the 50 DMA
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)
IDCC Took a day to rest with an inside day now needs to clear 53.50 with risk to PDL
NWL Inside day near the highs needs to clear 36.39 with risk to PDL
TLT Closed the gap from 12/1 with some conviction. Like best for an ORR against 120.62 with risk to 120.13
BAC Took a day to rest, needs to clear 17.40 with risk under PDL
PETM Broke out of its inside day only to have a sharp sell off at the end of the day, now needs to clear 79.68 with risk to 78.00
Category 4: N/A
Phase Change:
PRU Confirmed the phase change to accumulation. Now needs to hold 86.10. Like best over 87 with risk under PDL
Focus List: APD, CIEN, GLD, MRVL, GREK
Shorts:
Category 5: Titanic-Bear Phase, Negative pivots, not oversold, Risk R1 or previous day high. Target: Day to swing
EQT Still heavy although getting over sold a break of PDL looks best for a daytrade
Category 6: N/A
Best Best wishes for your trading,
Michele Schneider
