We ended Thanksgiving week thinking that volume would be the main indication for when this market could see a significant enough top to make that claim, as opposed to the orderly and healthy correction that the first week in December yielded. We looked for a blow off rally on double or more the average volume. Instead, what we got was some distribution days in volume, particularly in the small caps (Russell 2000s) which told us that a correction was coming, but clearly not the end of days. Volume indicators are extremely useful tools if one knows how to interpret them. Big volume up or down is not enough to make any succinct predictions. It’s the ability to interpret the relationship of the volume relative to each day and the daily average along with explosive candlesticks or price action in any individual instrument that separates the professionals from the novices. Ok, so yeah, I know a little something about volume. This week ended with NASDAQ on new highs but not the Dow, S&P 500 or Russells. Remember my vote for the most likely to succeed last week-NASDAQ? Volume though, not impressive, except for the accumulation day in S&P 500. Yes indeed Thursday’s inside days showed us the way on Friday after the gap higher. Even with the Dow closing up $198.69, folks are hesitant to go in. In fact, more than hesitant, they get negative if a 5 minute candle is red even on a strong up day. Talk of bubbles, confusion on what the economic numbers mean-typically those are already priced into the market. These factors plus the constant rotation of sectors and groups are why many remain in cash. Therefore, I will continue to look for the late arrivals to the party, the huge surge in volume and a blow off rally as go-to signs that tell the tale.
S&P 500 (SPY) 180.40now support with 181.11 the 2013 highs. Incidentally, a while back I wrote that the measured move on this was ultimately 220. Subscribers: Positive Pivots in all
Russell 2000 (IWM) Last Friday wrote-112.43 has to clear to get excited-it closed at 112.48-so replacing excited with encouraged.
Dow (DIA) 159.50 becomes an important area of support
Nasdaq (QQQ) Our runaway gapper from October 18th has had a sterling run.
XLF (Financials) We all like to see financials doing well-not so the CEOs get richer, but for confidence in the overall market. Therefore, 21.45 really has to clear
SMH (Semiconductors) New 2013 highs!!! And what might be the start of a runaway gap
XRT (Retail) “Looking a bit heavy unless it clears 87.75”-and so it was-broke down Friday with a pretty significant bearish engulfing pattern, but on low volume
IYT (Transportation) 128.40 good point to hold now for it to continue
IBB (Biotechnology) Held 219 and closed well. 230 not a bad target if 219 holds
IYR (Real Estate) Cleared the fast moving average. Friday’s low now important to hold
XHB (Homebuilders) It held the 50 DMA and now has to clear 31.50 to continue
GLD sloppy trading Friday-but no major rally either so the reversal candle may not hold after all for more downside
USO (US Oil Fund) Pushing against the moving average resistance.
OIH (Oil Services) I like the long term chart so watching for a move over 48.45
XOP (Oil and Gas Exploration) Considering the run in 2013, its ending more ominously if cannot get back over 68.70
TBT (Ultrashort Lehman 20+ Year Treasuries) 102.16 in TLT is ridiculously key to predict the future of rates
EWG (Germany) 30.33 is the low of the island top to clear to negate that pattern
FXI (China) Weekly close over 40.00 good-could see much higher levels in the coming year
FCG (First Trust ISE Reserve NatGas) Subscribers: Disappointing day
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 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)
QCOM Never gave a signal but now, if clears 73.97 clears the all-time high made Friday. 73.30 good risk
AMT 77.50 now support to hold with a good flag forming on the daily. Target around 82.00 near term
MCHP And just like that-no more oversold and back to a contender for new highs. Has to hold 43.15 level
RIO If holds Friday high, then still has lots of room-especially if can clear the weekly/monthly charts moving averages
BBBY Good move over the 10 DMA. 77.50 good support now and over 79.00 busts out to new highs
GE Return over 10 DMA. If Friday’s low holds, still has long term potential
OI Inside day and best risk is the 10 DMA at 33.20. Over 33.60 could keep going-a pick for 2014
HUN Close to breaking the highs if clears 23.50 and has to hold 22.95
FITB Friday had a good opening range reversal. Now, clearing back over the 10 DMA so worth a new entry if holds 20.00
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:
JBLU If holds 8.25 and clears 8.45 back in play-probably waiting for oil to stop rallying
Phase Change:
HSP Digested. 41.10 a good place to hold
LGF 3 inside days against the 200 DMA. 30.95 clears R1-like that if it happens
CVX Tight stop 121.37 or S1. Like on reversal or breakout to top of channel
CCUR Inside day and over the moving averages and the 80 monthly. Longer term risk really 7.33 but tighter is under Friday’s low over 8.00 if this can get there looks good for 2014
PLD Brick wall bottom. Like over Friday’s high and if Friday’s low holds. 2014 pick
Shorts:
Category 5: Titanic-Bear Phase, Negative pivots, not oversold, Risk R1 or previous day high. Target: Day to swing
LULU 70.68 good risk and under 69.20 looks like it could visit 66.00 or lower
SCSS If cannot clear 21.00 looks weak Friday’s low
POT If breaks Friday low and cannot clear R1, could see resumption of move down-monthly chart weak
MOS Under S1 and the 50 DMA like for a short to 40.00 support or lower
Category 6: White Cap-Having a 2-3 Day correction over the pivots.. In a Negative Phase, Positive Pivots. Can sell an Opening Range High Failure if happens below R1 or previous day high whatever is higher and/or weakness if breaks S1 and prior day’s lows
CAM Under S1 or 55.50 like for swing short with risk to 56.60 or around R1
Bye For Now!
