We ended last week steeped in the Chinese New Year metaphor of the sheep/goat for good reasons. In 2014, the Year of the Horse became an image engrained in my mind because the market so often resembled a horse-one that loves to gallop yet easily bucks, one that can be skittish but also proud.
2014 was a year to sell substantial rallies and buy substantial dips. Many adages that had held true prior, went the way of the contrarian horse.
But this is 2015. The tenor of the market has vividly changed. Hence, the New Year, new image. If we are to stick with the notion of sheep and goats, we must remember that consolidation evokes the imagery of peaceful grazing. We must also remember that they do not run as fast as a horse, therefore, we see rallies more like trots, not nearly as volatile as full gallops.
Consequently, it stands to reason, although we can expect wolves to appear disguised as sheep from time to time, after the initial scatter or sell offs, the herd’s hunger for forbs will bring them back to pasture to graze and bleat.
Now I believe I’ve beaten the dead horse and sheep analogy enough to make my point; nonetheless, I shall remind everyone from time to time to summon up the glaring differences of the horse versus sheep and how that impacts the variance in tone of the market from last year to the current one.
If we look at the layers that comprise 2015 thus far, we see bullish phases in all indices, a bullish bias going out for the next few months based on thepenetration through the 6-month January Calendar range, Interest Rates(TBT) inching higher having a more positive than negative impact on the US market, and the leading sectors and groups roaring to new multi-year highs such as Semiconductors (SMH), Retail (XRT), Biotechnology (IBB), and Homebuilders (ITB).
Moreover, with the volatility index (VXX) or fear declining sharply last week in spite of the Golden Cross (the 50 DMA clearing over the 200 DMA for the first time since 2012), we now anticipate the financial sector (XLF, KRE) to play catch up and Emerging Markets (EEM) to continue to base out.
S&P 500 (SPY) Found forbs and rallied to new highs. Subscribers: Positive Pivots in all except IWM
Russell 2000 (IWM) Yet another New high close
Dow (DIA) Found candy and went to new all-time highs
Nasdaq (QQQ) Impressive!
XLF (Financials) 24.90 the January Calendar Range high, yet cleared back over 24.37
KRE (Regional Banks) 41.06 the January Calendar Range High to clear
SMH (Semiconductors) New multi-year highs
IYT (Transportation) 165.17 January high
IBB (Biotechnology) Steroids
XRT (Retail) New highs as I would have expected
GLD (Gold Trust) Action suggests a move to 112 unless it clears 116.90
GDX (Gold Miners) 20.00 needs to hold
USO (US Oil Fund) I would be happy if this holds 18 and doesn’t clear 20 for a while longer
TAN (Guggenheim Solar Energy) If this gaps over the 200 DMA 38.82 time to add
TBT (Ultrashort Lehman 20+ Year Treasuries) In spite of the FED’s policy, rates want to stay steady if not climb higher
UUP (Dollar Bull) 24.70 support
EEM (Emerging Markets) Over 41.00 looks good
EWW (Mexico) Subscribers: Over 60.00 is the place to clear
EWG (Germany) Needs another push over 29.50
FXI (China Large Cap Fund) long term bullish
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)
TXT If holds 43.90 or even 44.60 like on an ORR or early move up for day
AFL Unfortunate played too tight but can get back in for the long haul if holds 61.00
AAL Unconfirmed phase change to bullish with a bullish engulfing pattern. Like if holds 50.20 with a good weekly chart
SWI Over 51.80 with a Miniswng risk still looks good
Category 4:N/A
Phase Change:
TSLA Confirmed phase change to Recovery. 211 area has to hold with ORR better for risk.
TEX Explosive move Friday and now over Friday’s high could continue especially if winds up clearing the weekly and monthly moving averages in the process
BAX Classic slingshot off the lows with huge volume. If confirms over 68.60 swing risk to the lows
Shorts:
Category 5: Titanic-Bear Phase, Negative pivots, not oversold, Risk R1 or previous day high. Target: Day to swing
GOOG over Friday’s high not a good short, but for now, on the list 2015 picks and negative pivots so watch for a break of 538-should be swing
Category 6: N/A
Best Best wishes for your trading,
Michele Schneider
