Many folks have been asking me questions lately about certain commoditiesand whether or not I see basing action. Let’s stray from the sheep/goat conversation for now (related to the indices) and talk about bears and potential bulls (old school).
Not only are many commodities hanging out in a completely different pasture from the rest of the market, that pasture is fallow. Instead of wolves as the major predators, commodities have been under siege from a strong US Dollar, weaker Emerging Markets Supply/Demand issues, particularly in oil and energy, and domestic political pressures (Keystone Pipeline, Farm Subsidies, etc.)
Looking at the Commodity Index (DBC), since July 2014, it has traded under the 50 and 200 Daily Moving Averages in a sharply accelerating Bearish Phase.
Simple way of determining whether or not the instruments in that ETF are basing out or not is by watching the declining 50 DMA. If the price clears over and the slope of the 50 DMA flattens out, we can safely assume that selling has dried up.
But, is that the same as assuming buyers have come in? Not really. I can report that on January 30th, DBC had a reversal pattern off the lows. Those lows remain solidly in place. The subsequent price action suggested that not only had selling dried up, but also that buyers came in over the following week and a half.
To date, those buyers have disappeared. I will be observing the 50 DMA and where the price trades in relation to it, as well as how much volume appears. A move above the 50 DMA along with greater than average volume and perhaps we will have a whole new pasture to play in.
I do have to mention, though, that these rallies in the indices have been so peaceful. Really, if you think about it, sheep are the perfect metaphor. Quiet grazers, nothing crazy, who scatter at times only to come back for more.
S&P 500 (SPY) New high close Subscribers: Positive Pivots in all
Russell 2000 (IWM) Although a bit overbought, another new high close
Dow (DIA) Strong new high close
Nasdaq (QQQ) Consolidating near the highs
XLF (Financials) 24.90 the January Calendar Range high to clear
KRE (Regional Banks) 41.06 the January Calendar Range High to clear
SMH (Semiconductors) New highs-they’re back!
IYT (Transportation) 165.17 January high-big eyes here!
IBB (Biotechnology) From steroids to the result of too many steroids
XRT (Retail) Consolidating
IYR (Real Estate) Maybe overvalued but declined on lower rates-unusual to see
ITB (US Home Construction) New highs with a breakaway gap
GLD (Gold Trust) Noise unless it clears 116.90
GDX (Gold Miners) 20.00 needs to hold and over 21.00 gets interesting
USO (US Oil Fund) Pipeline news might have affected this
XLE (Energy) Watch volume patterns in this and XOP OIH
TAN (Guggenheim Solar Energy) 38.82 now area of support to hold for an add
TBT (Ultrashort Lehman 20+ Year Treasuries) TLTs did what I thought; took out 128 found some resistance at 130 but could see 132.00
UUP (Dollar Bull) Sideways for 3 weeks
EEM (Emerging Markets) A move over 41 will take away one negative for commodity prices
EWW (Mexico) Subscribers: Over 60.00 is the place to clear
EWG (Germany) This looks really good if closes week out 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: (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:
*FDX Reports March 18th 2 INSIDE days 4 days under pivots which means it has to clear today’s high and R1 with risk to 176.63 the 10 DMA
SWI Inside day Over 51.80 with a Miniswng risk still looks good
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)
AAL If holds the 50.80 the 50 DMA and clears 52.20 looks good for more
CIEN Like on an ORR or move over today’s high for new 2015 highs
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:
BKD If clears back over 35.82 but really over 36.00 then can do a new swing with the original risk of 35.38
Phase Change:
NVDA Consolidating over 22.00 and over 22.50 goes to a new multi-year high
SPWR Cleared the 200 DMA and good candidate for an ORR-huge volume
PNRA Phase change if holds 159.50 level and closes above to confirm the phase change over the 200 DMA
AFL Still like this now if holds 61.75 level for a daytrade at least
APOL Been years since I looked at this. Converging moving averages if clears 28.63-can look at an ORR too
TEX Narrow range day. Like over 27.39 for a miniswing trade against Monday’s low
PM 82.50 now support with an ORR or move over 84.00 early on
*SODA Classic slingshot reversal with great volume-reports before the open so big eyes here
Shorts: Focus List: AMT HCP VNO GEL
Category 5: N/A
Category 6: N/A
Best Best wishes for your trading,
Michele Schneider
