Over the weekend, Keith and I watched a documentary on Netflix about Shane McConkey, a pioneer of free skiing and ski-BASE jumping, who through his talent and ability to use his trademark irreverent humor, inspired countless lives.
Shane skied off impossible cliffs, which in turn became a base jump (parachuting from a fixed structure or cliff). His jumps were usually at a low altitude with only a few seconds to deploy the parachute, and virtually no time at all to deal with problems or malfunctions. BASE jumping is so incredibly risky that it's actually illegal in many places.
McConkey met his demise while doing a ski run off a cliff in Italy, wearing a wingsuit, which was to help him fly long enough to drop his skis and deploy a parachute. However, Shane’s right ski did not release, and became snagged leaving both skis attached to his body. Without panicking, Shane calmly, methodically reached down to manually release the binding, working to get the right ski off as he plummeted to Earth. The chute finally popped free, but he was already nine seconds into free fall, and the ground rushed up to meet him at 110 miles per hour.
Trading can be like an extreme sport, particularly if you lack skills, a plan and a systematic approach to ensure safety. This is why I write every day and why I have spent this entire month talking about the January Calendar Range, the interest rates, the small caps and oil.
Wednesday, there was a domino effect. The Federal Reserve announced concerns about falling inflation which led to the interest rates dropping further, and then the Dow took out its January Calendar Range low-not surprising considering it weakened in phase first.
The small caps, S&P 500 and NASDAQ all are above the January Range yet all in warning phases as well. The S&P 500 is the next closest to the January low.
Therefore, we look once again at our few go-to signs. First, watch oil. Big drop, but always on the lookout for a blow off. Secondly, watch interest rates or long bonds-again, flight to safety continues, but also on the lookout for a blow off. Both blow offs have yet to happen or at least concern so for now, consider the trend as a friend. Finally, what happens next with the indices-can SPY, IWM and QQQs help the Dow recapture the January low, or will SPY be next to break with the IWM and NASDAQ not too far behind?
In the meanwhile, have your skis, wingsuit and parachute at the ready. Plus even if the safety equipment fails, stay calm!
S&P 500 (SPY) Confirmed Warning Phase Broke all support but the January low at 198.55. A move over 202.60 could save this with anything can happen attitude Subscribers: Negative pivots in all
Russell 2000 (IWM) Unconfirmed Warning Phase Broke 117.30 the 50 DMA. Underlying support 115.30 with 114.20 the January low
Dow (DIA) Warning Broke the January low with the 200 DMA next up at 170.30 unless it gets back over 172.12
Nasdaq (QQQ) Confirmed Warning Phase Support at 100.93 held at the 100 DMA. The January low is 99.36 and over 102.10 better
XLF (Financials) Express train to 23.15 the 200 DMA and the January low.
SMH (Semiconductors) Confirmed warning phase and pretty far still from the January low
IYT (Transportation) Confirmed warning
IBB (Biotechnology) This is a bit scary in that it failed the January high after trading above it for 4 trading days
XRT (Retail) A bullish hold out for now
IYR (Real Estate) Over Calendar Range but with a possible reversal candle if confirms
ITB (US Home Construction) 24.05 key support
GLD (Gold Trust) Well over its Calendar Range yet would have thought it could have rallied more in the wake of the rates
USO (US Oil Fund) Where she stops nobody knows
TAN (Guggenheim Solar Energy) Solar will not firm until oil stabilizes. However, showed signs of wanting to firm this week so eyes on
TBT (Ultrashort Lehman 20+ Year Treasuries) TLTs not saving the day-why? Fear!
UUP (Dollar Bull) 24.70 support
EWG (Germany) Inside day-interesting if clears 28.35
FXI (China Large Cap Fund) Still holding better than most, but gravity is hard to fight
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:N/A
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)
AAPL if holds over 114.77 good as one of the strongest stocks around
JWN Amazingly, positive pivots and with 77.05 a good risk point if holds
ETR Reports February 4th Outperformed and holding the 10 DMA at 88.50. If that holds, then back over 90 could see a move to recent highs
Category 4: N/A
Phase Change:
WTW Reports February 12th A one day pattern with an inside day makes this worth watching over today’s high 17.76
AA If holds 15.75 for a miniswing maybe swing still a contender
Shorts:
Category 5: Titanic-Bear Phase, Negative pivots, not oversold, Risk R1 or previous day high. Target: Day to swing
HUN Under 22.26 looks bound for the 200 WEEKLY at 18.70
DTV ½ position. Under the 200 DMA now for an unconfirmed phase change to Distribution-now resistance at 84.92
CBS Reports February 12th Under 55.76 breaks S1 and the 10 DMA for a new short with risk to over today’s high for a swing
Category 6: N/A
Best Best wishes for your trading,
Michele Schneider
