Hi all! To begin, my compliments and gratitude to Geoff Bysshe andJonathan Griffin who both did an outstanding job delivering pertinent and accurate analysis each day in my absence!
Keith and I went to Mexico for our vacation. I eat an extremely restrictive diet (hardly any animal products) due to some health concerns; but, since we were heading to the seafood capital (Cabo San Lucas) where the fish (and the whales) are running abundantly, after successfully digesting a fabulous fish ceviche earlier that week, I decided to eat some freshly caught lobster several nights later (first one I’ve eaten in over 3 years).
Like the market, I got a bit cocky. I’m thinking, hey, I can handle this-let’s (my stomach and I) eat more fish, my system will absorb it. While we were away, the market behaved similarly, absorbing lots of selective buying and running up to new highs.
However, the story does not end there for neither me nor the market. I got sick-really sick and wound up ending our trip in the ER with extreme dehydration (you can guess why). The market had its own little health emergency during Monday’s session dropping over 100 points with some of its body parts looking way worse than just dehydrated. In fact, to stretch the analogy further-oil and especially gas, well let’s just say we both are suffering from an overproduction!
The Russell 2000s or small caps took the hardest punch. However, they remain in a fairly well-sized trading range. The S&P 500 and the Dow could be having another reversal pattern off their highs but require confirmation.NASDAQ broke the fast moving average, first time since early October. Interestrates continue to drop precipitously and I come back once again focused onmetals and miners, looking for follow through or at least a confirmed phase change.
After a week, I am starting to feel better. The question for the market is how long a convalescence will it require before it resumes robust health?
S&P 500 (SPY) Like QQQs first close under the 10 DMA since early October. I would expect more correction with support at 205.38 then 204. Subscribers:Negative pivots in all
Russell 2000 (IWM) 114.30-118.00 is the range for now and wouldn’t pay such close attention until that range breaks one way or another.
Dow (DIA) Actually held the 10 DMA although if gaps below or takes it out tomorrow should seal the near term fate for the whole market
Nasdaq (QQQ) 102 big support-in fact, I remember writing about this level in November. A close under 104.42 is a confirm of the December 1st key reversal from the new highs.
XLF (Financials) A strong sector now as it made news highs although a bit extended here
KRE (Regional Banks) If the market doesn’t fall apart, still like this group longer term.
SMH (Semiconductors) A textbook reversal pattern if confirms
IYT (Transportation) Under 160.41 starts to look real nasty-til then it is correcting mainly
IBB (Biotechnology) Never underestimate this group is the lesson here as it made new highs on the Cubist takeover news
XRT (Retail) Before I left I wrote to take profits on a post Black Friday rally then stay away. Now, let it finish the correction
IYR (Real Estate) Likes 76.00 and loves the interest rate move
ITB (US Home Construction) Like to see what happens at 25.00
GLD (Gold Trust) Unconfirmed phase change back to recovery-second day confirmation needed
GDX (Gold Miners) Over 20.00 looks good
USO (US Oil Fund) Remember when $3.00 per gallon sounded cheap?
XOP (Oil and Gas Exploration) Looks like the weight drop I just had
TBT (Ultrashort Lehman 20+ Year Treasuries) TLTs Needs a close above 122.85
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)
RTN 2 Inside days so a perfect daytrade should this come in and have a 5 minute OR breakout over today’s highs 108.75
LMT Doji day on the 10 DMA so if 188.47 holds for a mini to swing like this over 190.74 R1.
IGT Still like this against today’s lows if clears 17.27 fro swing
ETR Big day and improved condition change. Like on an ORR mainly unless it clears 84.58-84.99 then could buy strength for a miniswing
ODP After the huge gap post earnings, this has come down with clean support at 6.22. If we risk tight, like to see if this can clear 6.50 the 10 DMA.
PG Over 91.17 could see another run to new highs-risk to 88.97 for swing but also good to look at a day to miniswing
STZ Outperformed the market and has positive pivots. Like if holds todays low and clears 96.20
JNJ over 109.50 clears a month’s consolidation risk under 107.22
Category 4: N/A
Phase Change:
CYH Unconfirmed phase change to bullish but a bit overbought so prefer an ORR for more like a miniswing trade now. Risk to today’s low 50.35
BAX Doji day close. 73.75 good risk point if holds on a reversal or breakout for a miniswing.
FB Confirmed phase change to bullish, like risk to 75.36 and with positive pivots look for any type of setup
PM Held the 50 DMA and closed on S1. Now, over 87.20 takes out R1 and good risk to today’s low works good
Shorts:
Category 5: Titanic-Bear Phase, Negative pivots, not oversold, Risk R1 or previous day high. Target: Day to swing
CNO Converging moving averages with a close beneath for an unconfirmed phase change. Under 17.00 could see more downside with risk to around 17.36
NFLX At this point the trade is for it to break 331. Until then, lets look at selling an OR high failure situation to control risk
QCOM Phase change unconfirmed with 73.51 today’s high resistance and if good, can do a swing trade
Category 6: N/A
Best Best wishes for your trading,
Michele Schneider
