The month ends with the market’s worst performance for a month since May 2012. However, the lows of last week were ultimately defended on Friday signaling that our bipolar patient-aka-the market, could have a mood swing either way come Monday. Hopefully, the market finds its way to some of the good drugs thepharmas have been pumping out lately.
But, investors must be prepared for the worst as we have 4 heavy duty days of distribution in volume-over the daily average volume and all in a span of the last two weeks of January.
To regain confidence, we must look for the major culprit in this decline-emerging markets. The ETF EEM is where eyes can be. A clearance of Friday highs will be a good confirmation that perhaps, at least for that sector, the worst is over temporarily. The operative word though-temporarily.
The emerging market chart pattern also indicates a breakdown over the course of the last 2 ½ years which means a move under 35.00-very ugly indeed.
S&P 500 (SPY) Yes held the weekly lows, but not exactly jumping for joy on that news. A gap below on Monday-not good. Subscribers: Negative pivots in all
Russell 2000 (IWM) Let’s put it this way, a gap under 111.02, and we can see a really big dump. But, the yin and yang (Chinese New Year), we should also say that over Friday’s high and a very long term trendline will have been defended.
Dow (DIA) This might be the one index I wouldn’t look to short on a weaker open so close to the 200 DMA
Nasdaq (QQQ) I can hardly believe my eyes, but this confirmed the bullish phase closing out the week over the 50 DMA. No bubble in tech and social media here.
XLF (Financials) Broke down under the bear flag but, held the weekly lows
SMH (Semiconductors) I always want to love semis and still do, but if the market corrects, will wait for a move to 40.00 before reentering long
IYT (Transportation) confirmed bullish phase so another place that looks a lot better
IBB (Biotechnology) Was last week the peak? Could be based on the weekly close-something to watch for
XRT (Retail) If this moves over Friday’s high then maybe we have seen the bottom here. Maybe
IYR (Real Estate) Hard to read even with the outperformance on Friday.
XHB (Homebuilders) Reversal off the 200 DMA but now, has to clear the 50 DMA
GLD Looks good then looks worse but still over the 50 DMA
USO (US Oil Fund) Doji hammer candle-34.50 good place to hold
XLE (Energy) Very vulnerable
XOP (Oil and Gas Exploration) A group I loved, now looking much heavier
TBT (Ultrashort Lehman 20+ Year Treasuries) TLTs unconfirmed phase change to accumulation
UUP (Dollar Bull) Confirmed phase change back to recovery
CORN (Corn) Subscribers: Inside day. One more push will clear the 50 DMA
JO (Coffee) Subscribers: Big move!
FCG (First Trust ISE Reserve NatGas) Not a bad group to watch
SGG (Sugar) Subscribers: Exploded so giving it another day to see if that was for real
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) N/A
Category 2: (Pipeline) Positive Phase, Condition 2-3, 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:
BHI R1 has to clear but still like this one too
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)
CIEN Over 24.37 looks good with risk then to either way down at moving averages or a closing hold of 24.00
HSP Reports February 12th. Over R1 Monday clears the 10 dma and then has to hold 43.75 tight risk
CCUR now has positive pivots and tested 8.50-another day it holds up over 8.30, will go long
CRM Reports February 27th Inside day near highs-all-time highs so a good day to miniswing trade if the market is ok
Category 4: (Rip Tide) N/A
Phase Change:
RIO February 13th reports. If Monday opens strong back over the 50 DMA 53.15, then go with it
SHO Reports February 20th. Confirmed a brick wall bottom and a phase change. Over 12.95 like if willing to risk to 12.41
AAPL Possible glass bottom if it holds Friday low and clears R1 at 503.58. Then look for a bounce to around 520.
Shorts:
Category 5: Titanic-Bear Phase, Negative pivots, not oversold, Risk R1 or previous day high. Target: Day to swing
DVN Reports February 19th. Has to break 58.21 though the recent low
TCK February 13th Reports. 24.70 resistance if this cannot hold 24.00
JOY Under 52.12 breaks recent lows and could drop to 50.00 or lower. Reports February 26th
Bye For Now!
