As we head into the Year of the Horse, thinking market only here (I was born in a Year of the Horse), is this what we call beating a dead one?
Startling move in Russell 2000 as it went from new highs on Wednesday, to a heart palpitating drop to the50 day moving average on Friday! Of course, the bigger they are, the harder they fall.
What’s next? I’ve been down this block before-the one when the rush to the exits happens, then the phase change to an unconfirmed weak warning (SPY DIA), oversold on those two on a daily relative strength indicator, more selling, then-a climax bottom.
What does a bottom look like? New lows, typically a 60 day or more new low, a reversal from the lows intraday, with double or more average the volume, followed by confirmation the next day.
Til then, hold back the reins!
S&P 500 (SPY) On 12/18 the SPY dropped to 177.32. Friday low, 178.83. Not a bad spot to watch as we have to think more selling is still around the corner Subscribers: Negative pivots in all
Russell 2000 (IWM) Not even close to that 12/18 low and held the 50 DMA. Not cheering, mind you-more noting how much this might have to bounce on Monday-and if cannot, a good place to see support
Dow (DIA) 158.11 the 12/18 low here Friday low 158.48.
Nasdaq (QQQ) The 50 DMA at 85.99 is first place to look-either for a hold or a precipitous drop from there
XLF (Financials) 21.00 support
SMH (Semiconductors) 41.50 some support if it breaks the 50 DMA then returns through it on Monday
IYT (Transportation) Wait-new highs Thursday followed by a huge dump Friday? And you thought trading was easy?
IBB (Biotechnology) Actually, holding the fast moving average
XRT (Retail) On the 200 DMA and oversold on the weekly relative strength indicator
IYR (Real Estate) This fell with the market, but into some support at Friday’s lows
XHB (Homebuilders) The power of inside days-once it broke Thursday’s low, it was south with support around the 200 DMA
GLD Even though this outperformed, somehow, I thought it should have done better-but, for now, any dip to around 120.45 considered a buy opportunity
USO (US Oil Fund) Dropped to the 50 DMA making this a fave for Monday if holds Friday’s lows
XLE (Energy) One major concern, is the possible double top from November highs and late December highs. Although 84.00 some interim support, would look to sell a rally closer to 85.00
XOP (Oil and Gas Exploration) Maybe a shot to hold Friday’s low with a group that I am still friendly to
TBT (Ultrashort Lehman 20+ Year Treasuries) 70.15 is a very important support level
UUP (Dollar Bull) Confirmed bearish phase
KRE (Regional Banks) One that held the 50 DMA
CORN (Corn) Subscribers: Green in a sea of red-Monday should be interesting
BAL (Cotton) Spent the week consolidating a range. 55.55 high 54.59 low-good one to follow the way the range breaks
JO (Coffee) Subscribers: 22.25 is the 50 DMA and a great risk should this clear R1 and Friday’s high
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
NOTE: The Portfolio shows a net loss of 2% on 100k and 1.5% loss on 139k, where January started, (minus the open positions). In a tough environment, we are still outperforming the market which has dropped over 2.5% in SPY and over 4% in the Dow. This is a minor drop in equity and should be used as a sign of how well the system works, even in a changing market environment.
Now, looking for trades that are a Condition 1-4, didn’t deteriorate in condition, and outperformed the market near a major moving average.
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:
COG Reports February 20th. Has to hold S1 39.32 max risk so a Miniswng trade, and holding a possible runaway gap. If clears Friday’s high and R1, then could be a continuation up to 45.00
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:
SCTY Reports February 24th. If Friday’s low holds (max risk) and it clears Friday’s highs, then still a group we like for this year
OMC Reports February 11th If holds 71.70 and clears Friday’s highs, good
Category 3: (Double Up)N/A
Category 4: (Rip Tide) N/A
Phase Change:
CYH Reports February 18th 39.00 now good support to work from with a good close. Through 40.58 the 40.66 clears the 50 DMA and 65 weekly moving average
CHK Reports February 20th. If clears R1 and Friday high, have a good risk to the 50 DMA or 26.45
Shorts:
Category 5: Titanic-Bear Phase, Negative pivots, not oversold, Risk R1 or previous day high. Target: Day to swing
MCD 95.20 good risk point with the possibility longer term, this could see prices down to 88.00
SCSS Reports February 5th. Looks like its headed to the 80 month moving average or 13.20 with risk 17.10
CLR Reports February 5th. Back in unconfirmed warning phase, so if cannot clear 109 could see a drop to 100 next support
ETR Reports February 11th 62.03 max risk and if breaks down further, could break a –year low and see much lower down the line
Bye for Now!
