We were sitting at brunch on Sunday with our cell phones firmly planted in our coat pockets since eye contact and intimate conversation are so readily replaced by texting and tweeting on our cell phones.
That got me thinking about the warp speed in which information travelsthese days. I began to envision the planets orbiting around the sun. If you can imagine the sun as the market, planets as information, the planets themselves as people, and then think about the speed of their orbits around the sun traveling at warp speed 9.97 (at warp speed 10, humans devolve back to salamanders), the doppelgänger of a complete cycle or one full day goes from 24 hours to about 5 seconds.
Now, apply that to the impact social media has on the markets. Nearly everyone has access to instant information, with virtually zero barrier to entry on who provides that information. Information exchange (true or false) then travels fast enough to make Mr. Spock’s head spin. Enter, reaction.
How then, can any economist or analyst make a logical prediction on economic cycles and their long term impact when these cycles now (at least from abehavioral standpoint) happen in minutes rather than months or even years?
Segway to the S&P 500. We begin the week confirming a weak warning phase. However, with all the bearish forecasts, SPY is only down a little over 3% from the highs. The small caps (Russell 2000) remains in a bullish phase. I noted last week the slopes on the 50 daily moving average are positive. Overall, daily volume is running just about average. The negative cycle of the last 2 trading days brought the bears out of hibernation. Yet, given the speed of current cycles anything positive could easily send them right back to their dens. If the behavioral perception changes for pretty much any reason (hard to predict what) put on your suntan lotion and prepare for a sunny day.
S&P 500 (SPY) If takes out 204.70 that will put life back in the market. Otherwise, see 200.50 next support Subscribers: Negative pivots in all
Russell 2000 (IWM) Still in a range between the December low and January high. And held onto the 50 DMA.
Dow (DIA) 176.65 is the 50 DMA and on Friday it was 176.51-that is a slope going up!
Nasdaq (QQQ) 100.66, then 102 then 103.24 are the 3 main points
XLF (Financials) Into support so it has anything left needs to run up from here
SMH (Semiconductors) Relative to the financial sector, semis remain a place to go for strength, especially if can clear 53.80
IBB (Biotechnology) Held 310 that’s a good thing and still showing leadership
XRT (Retail) Possible double top at 97.15. Yet, still in a bullish phase.
IYR (Real Estate) Held on as the leader with a new high close again
ITB (US Home Construction) Still strong
GLD (Gold Trust) December high here 118.99 close by and if clears good to the 200 DMA at least
GDX (Gold Miners) Took out the December high the 200 DMA is at 22.86
USO (US Oil Fund) $1.57 at the pumps in Santa Fe
XLE (Energy) Still defending the 2014 low
TBT (Ultrashort Lehman 20+ Year Treasuries) TLTs new high close-that is not helping the market confidence
UUP (Dollar Bull) No real concerns unless it breaks 24
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:
IGT Inside day and should hold today’s lows max for a tight risk should this clear today’s high and R1
KSS if holds 60.35 and clears 61.16 R1 could power up to clear 62 and keep going
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)
PNRA At this point has to clear 177.37 and hold 175
VMC Really has to clear R1 68.71 with slightly negative pivots. Has to hold the 10 DMA
GM Inside day near the highs and over today’s high clears R1 for a miniswing
Category 4: N/A
Phase Change:
GLPI Inside day and over 31.35 looks good with risk to today’s lows or 30.30 Friday’s low
MOS looks ready to tackle the 200 DMA at 46.85 and if does not base formed for a swing
SUNE 19.92 the 200 DMA making this a good one to look at for a swing if holds today’s low
COH Looks good if holds 37.46 and better 38.00 swing
Shorts:
Category 5: Titanic-Bear Phase, Negative pivots, not oversold, Risk R1 or previous day high. Target: Day to swing
VLO Probably like an ORR better now for a day to mini
GILD warning phase with max risk now 103.90 and support next at 97.50 for a mini to swing
BITA This is a 2015 short pick which fooled us last week. Now, under all moving averages but thinking ORR only now
XOM I see 88 or lower here if cannot clear 92.00
CSIQ 23.27 max risk and looks like it is going to 14.80 the 80 month moving average
Category 6: N/A
Best Best wishes for your trading,
Michele Schneider
