“You put your right foot in, you put your right foot out; you do the hokey pokey and turn yourself around; that’s not what it’s all about”
My 3 tells, patience and a systematic approach to trading help so much in preventing us from doing the hokey pokey (except at children’s parties.)
The Russell 2000 (even though I have renamed it Sybil 2000) reliably indicates whether one should be long, short or neutral. Take this week thus far. On Monday, it valiantly held the January Calendar Range Low. Tuesday, it rallied and changed back to a bullish phase. Wednesday, it digested the week at the middle of the January Calendar Trading Range closing with a doji day (opening and closing prices are practically the same.)
The “tell” then is neutral to slightly positive, bullish over the January high and bearish under the January low.
Secondly, Interest Rates or Long Bonds help determine how much flight to safety or confidence the market has on any given day but also over time. Monday, TLTs broke from the highs while the market was weak therefore confirmed that safety plays were abating yet not with that much conviction. Tuesday, TLTs gapped lower-confidence returned to the market. Wednesday, they began weak then came back considerably from the lows to close higher. The ‘tell” therefore, is market not as happy and worry exists. Nobody wants to see rates rise too fast; rather, just enough to interpret firmer as buoyancy in the US Economy and equally, nobody really wants to see rates much lower (fear).
Thirdly, oil (which is really code for deflation fears), indicates exactly that-fear about economies dependent on oil, which in turn keeps rates low, which in turn becomes perceived as a flight to safety. Monday, USO gapped higher and closed well. That helped rescue the market. Tuesday it flew higher thereby exuberance prevailed. Wednesday, it sold off hard, the market chopped around. Yet, USOheld the gap low from Monday so, whew, maybe not so bad after all.
I even added a fourth tell this week-Financials (XLF). Over 23.75 that keeps one more on the confident side for now. Over the 50 DMA, if it can get there, way better. End of the day on Wednesday, with news of the ECB tightening collateral rules for Greek debt, XLF closed under 23.75 marginally.
Tally those “tells” up and you’ll soon replace “shake it all around” with a much smoother Waltz.
S&P 500 (SPY) Unconfirmed Warning Phase 204.44 the 50 DMA to hold 203.05 a good support point then 201.15 Subscribers: Positive pivots in all
Russell 2000 (IWM) Confirmed Bullish Phase should hold 117.45 the 50 DMA with the January high 120.56
Dow (DIA) Unconfirmed Bullish Phase if holds the 50 DMA at 176.44. Support then 174.65
Nasdaq (QQQ) Warning Phase unless it clears/holds 103.18 the 50 DMA. 102.50 support then 101.05
XLF (Financials) 23.55 support that should hold if good. The, 23.77 pivotal
KRE (Regional Banks) Inside day with noise until it clears 39.00
SMH (Semiconductors) Has a reversal pattern but really needs to clear 54.43
IBB (Biotechnology) Hanging onto the 50 DMA-don’t want to see this collapse but doesn’t necessarily need to lead either
XRT (Retail) Bullish phase and have to see it clear 96.00
ITB (US Home Construction) Held 26.16 which has to continue to hold
GLD (Gold Trust) Doji day here too-still over the 200 DMA so worth watching.
GDX (Gold Miners) Over 22.70 could be start of a good move higher
USO (US Oil Fund) Held 17.93 so that’s the number and over 19.20 new ballgame
XLE (Energy) confirmed recovery phase
XOP (Oil and Gas Exploration) Probably like this best in the oil and gas groups
TAN (Guggenheim Solar Energy) Quadruple bottoms since last October
TBT (Ultrashort Lehman 20+ Year Treasuries) TLTs Another Big volume day with a sell off then rally. Tricky
UUP (Dollar Bull) 24.70 support
EWG (Germany) Cleared the 200 DMA
FXI (China Large Cap Fund) Now, over 44.00 looks hot
CORN (Corn) Subscribers: Inside day and worth watching
BAL (Cotton) Subscribers: Also worth watching
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:
EA Still like this. 53.55 max risk now for a day to mini if holds 54.60
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)
DE Reports February 19th If holds 87.00 and better 87.50 could see more upside-watch for an ORR
AVGO Reports February 25th Tried to clear the 10 DMA and held 103 now max risk for a day to mini maybe even an ORR
RAX Reports February 17th. Cleared the 50 DMA and like if holds 46.00 for a move to 48 and maybe higher
Category 4: N/A
Phase Change:
SINA Reports February 24th. Unconfirmed recovery phase if holds 36.70 and today’s high and R1
SODA Reports February 25th Inside day. Over the 50 DMA is what we are waiting for a mini or 20.10
DDD Reports February 26th. Like over today’s high with 29.64 area to clear and 28.40 good place to hold
GS Tricky but still in good shape if holds 178.00
COH ORR best to control risk
KKD Over 20.00 worth a mini to swing with risk then 19.75
Shorts:
Category 5: Titanic-Bear Phase, Negative pivots, not oversold, Risk R1 or previous day high. Target: Day to swing
GOOG Held the 50 DMA but under 521.41 fails it with max risk about 530 Target 510
PX Inside day with a move under S1 good for short with risk to 123.75 for swing
BAX Inside day with a break of S1 good and risk at 70.95 for swing
Category 6: White Cap-Having a 2-3 Day correction over the pivots. In a Negative Phase, Positive Pivots. Can sell an Opening Range High Failure if happens below R1 or previous day high whatever is higher and/or weakness if breaks S1 and prior day’s low
CBS Reports February 12th. Under S1 like for a day to mini with risk to around today’s highs
Best Best wishes for your trading,
Michele Schneider
