Even before the market opened this Thursday, the “experts” tweeted busily on my twitter stream. “Oil Advances as OPEC Forecasts Slower Growth Supply In U.S.” “Bank of America Sees Oil Lower for Longer. New Target on Brent Oil at $31.00 and WTI at $32.00.” “Big Banks Stumble.” Bank of America Beats By $0.01, Misses on Revs.” “Yellen Is Gearing Up For The First Rate Increase Since 2006.” “Fed’s Rosenengren Says He Wants to Hold off on Rate Hike.” And so forth and so on.
You get the picture. Fast, furious and contrary. Oh my. There are 2 distinct conclusions one can make from the constant onslaught of opposing information and oftentimes opinions. 1. Listen to none of it and make decisions based on price alone, (plus use a consistent, sound and repeatable strategy). 2. Listen toall of it and if a segment of the market you are interested in has opposing stories, avoid trading in that arena altogether.
I find this particular theme extremely important in the current market condition. After all, we do have an accelerating warning phase in the indices, while we also hold the bottom of the trading range from the December lows. Earnings season gears up, which probably means more volatility in store until around mid-February (also coincidentally corresponds with the start of the Chinese New Year, the end of the Horse and the beginning of the much more docile Sheep.)
Friday the official six month calendar range activates, which looks amazingly synchronistic to the December to January range.
Here is a textbook opportunity with two powerful ranges lined up. That means avoid excessive analysis and any emotional baggage. Simply follow the way the range breaks.
S&P 500 (SPY) Marginally oversold but not looking too good right here. Unless, it opens higher and closes over 201. Subscribers: Negative pivots all
Russell 2000 (IWM) Holding the January low 114.36 so far and then we will have the December low. Not a firm line in the sand given the market weakness unless, it clear 115.50 and stays above
Dow (DIA) 172.86 is one area of support then the December low 170.74. Otherwise, we need to see this recapture 175.
Nasdaq (QQQ) Took out all the aforementioned lows and now we need one more index to join that for a confirm.
XLF (Financials) Hello 200 DMA
SMH (Semiconductors) Held 52 but might not for long
IBB (Biotechnology) Ouch, broke 310. The 50 DMA 303.06
XRT (Retail) Double top at 97.15 confirmed by breaking the 50 DMA well
IYR (Real Estate) Still strong but nothing holds up forever if the market continues to weaken
ITB (US Home Construction) When the Music’s Over…
GLD (Gold Trust) Closed on the 200 DMA, first time since August
USO (US Oil Fund) 2 day wonder. We are out with a small profit which is fine given the falling knife theory
TBT (Ultrashort Lehman 20+ Year Treasuries) TLTs The volume on Wednesday was buying by some pretty smart people-Blast off to new highs.
UUP (Dollar Bull) No real concerns unless it breaks 24
FXI (China Large Cap Fund) 42.00 down to 41.62 is the area to hold. Just such a hard thin ETF to trade
SGG (Sugar) Subscribers: Cleared the 50 DMA but we have been here before-so let’s keep eyes on it
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:
MRVL 15.24 is the 10 DMA risk with a move over the pivots for ½ and R1 for the other ½-mini to swing
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)
BYD over 13.00 is best with risk to 12.00 for swing wide stop
CI If clears 108 like for a day to miniswing and over 109.24 new highs. Risk 106
LAMR Like if holds 54.20 and clears 55.85 for a day to mini
Category 4:N/A
Phase Change:
GOOG Day to mini-like that this might have a double bottom in place. Over 505.60 with risk to 500 or thereabouts to see if we can get to 530 area
PWRD Sitting under the 200 DMA. If clears 19.27 and holds the low of the day it does it, then we have a swing trade (China stock).
SLW if holds 22.45 the 65 week moving average, and then clears 23.20 the recent high over the 200 DMA, then looks good for swing
Shorts: The index ultrashorts are all just under the 100 DMA. One more push gets them through as a short option if you can only buy
Category 5: Titanic-Bear Phase, Negative pivots, not oversold, Risk R1 or previous day high. Target: Day to swing
CSIQ 23.00 max risk and lets look now for an ORR to control risk
QCOM If stays under 73.68, has room to downside or 70.00 down to 65.00
CBS Short ½ and see longer term 45.00 area as target
GILD If cannot clear 99.45, can short under the low today and expect the 200 DMA not to hold next time
Category 6: N/A
Best Best wishes for your trading,
Michele Schneider
