Charles H. Dow, co-founder of Dow Jones and Company, was alive during the Industrial Revolution, a time when the US was a growing power. Dow's first stock averages were an index of industrial (manufacturing) companies and rail companies. To Dow, a bull market in industrials could not occur unless the railway average rallied as well, usually first.
However, we’ve come a long way, baby. To date, goods are shipped on the railways yes, but also by trucks, ships, and airplanes. Soon, maybe by drones?
A bull market has evolved into so much more than a just few manufacturing and rail companies. Mr. Dow lived well before the modern inventions we take for granted like, Biotechnology, Computers, Online Shopping, etc. Yet, certain credos of his still apply. For example, Dow believed that volume confirmed price trends and that trends existed despite "market noise". Markets might temporarily move in the direction opposite to the trend, but they will soon resume the prior move.
I bring up Mr. Dow today because it seems that he might concur that this year’s price action lines up will with the theory A) The trend is your friend until proven otherwise and B) Unless volume increases on correction days rather than what we’ve seen lately, short-lived, low volume corrections, it’s merely that-a correction and possibly a buy opportunity.
He also talked about accumulation and distribution which brings me to oil, gold and silver. USO broke down again, trading right at the pivotal 18.00. GLDrallied but could not clear the overhead moving averages and SLV likewise. Tying in Mr. Dow and my earlier commentaries this week regarding buying bottoms,Oil posted better than average volume yet remains under the 50 DMA with a declining slope.
GLD had light volume and remained under its negatively sloping overhead moving averages. SLV exactly the same. The conclusion? Oil is the most interesting due to higher volume but has to ripen. SLV and GLD are telling us that “smart” money has not yet accumulated anything worth noting as of yet.
Otherwise, the fear index or (VXX) Volatility, leapt towards Little Red Riding Hood, almost confirming its reversal bottoming pattern and eating Grandma (Yellen?). Luckily, the Sheepdogs came out on cue, forcing the wolves back to their dens.
All in all, the SPY closed Monday at 211.21, Thursday at 211.38, virtually flat. Baaaa!
S&P 500 (SPY) Subscribers: Positive Pivots IWM QQQs Neutral to Negative DIA SPY
Russell 2000 (IWM) New high close and a bit overbought on the 2-Day RSI
Dow (DIA) Paused near the highs
Nasdaq (QQQ) 108 held and posted a new high close
XLF (Financials) 24.90 the January Calendar Range high to clear, taking its sweet time too
KRE (Regional Banks) Inside day with 41.06 the January Calendar Range High to clear
SMH (Semiconductors) Consolidating
IYT (Transportation) 165.17 January high hasn’t cleared Mr. Dow would be upset
IBB (Biotechnology) Pumping Iron
XRT (Retail) Inside day. Consolidating and promising for more upside
IYR (Real Estate) 77.00 should be support
ITB (US Home Construction) IN correction mode and hard to tell how much more it has to go before it finds a level of support
GLD (Gold Trust) Noise unless it clears 116.90 SLV more interesting if clears 16.05
GDX (Gold Miners) Over 21.00 gets interesting and needs volume
TAN (Guggenheim Solar Energy) Over 39.60 on a weekly close, still super strong
TBT (Ultrashort Lehman 20+ Year Treasuries) TLTs Kind of weak considering it could not get above 130.5 let along 132. 128 key support
UUP (Dollar Bull) Classic Mr. Dow example of the noise between its primary trend
EEM (Emerging Markets) Has to clear 41
EWW (Mexico) Subscribers: Look for an add if holds 60.00
EWG (Germany) Like as it long as it holds 29.50
FXI (China Large Cap Fund) long term bullish
BAL (Cotton) Subscribers: confirmed phase change to Accumulation but also a possible reversal candle
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:
SWI 50.70 max risk with a move over R1 good over today’s high good-eyes on
JWN Inside day. Day to mini max if holds 79.80 and clears 81.59 for a move to highs or maybe to 85-86.00
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)
BKD The calendar range is key 37.23 for a miniswing max and 36.70 risk
Category 4: N/A
Phase Change:
DDD Volatile action, big volume so even though we lost on the trade, positive pivots, if clears the pivots also clears the 50 DMA and worth another shot
NVDA Consolidating over 22.00 and over 22.50 goes to a new multi-year high
SPWR As long as 32.00 holds now have a cheaper entry with this correction
PNRA 159.60 support level now with an ORR preferred because of how thin this stock is
AFL 61.75 a good day to miniswing risk with positive pivots if clears 62.20
WMT Like the risk to 82.50 if clears R1 at 84.02 for swing
TSLA 200.00 big support and the 50 DMA resistance at 209.48 that has to clear
Shorts: Focus List: HCP BIDU CBS (Under 58.62)
Category 5: N/A
Category 6: N/A
Best Best wishes for your trading,
Michele Schneider
