Hello 2014; hello correction. Although the last 10 trading days of December brought all indices and many individual instruments to new highs, many aspects of the market were troublesome in light of that. Furthermore, with Thursday’s session decline, many wonder whether or not last year’s highs were indeed the highs!
One possibility and certainly not a good one is if NASDAQ gaps beneath 86.95 as we end the week and stays beneath. That would be reason to run for cover.
But, we also have to watch for the S&P 500 to hold 182 and perhaps in the best shape and an index of reason could be if the Dow holds above 163.27. Otherwise, the Russell 2000s (continues to be my favorite “tell”) already signaled a top as of December 26th and was first to break the fast moving average intraday. To make life really fun, it closed the session right on the fast moving average. Pivotal for sure.
Most interesting is the incredible divergence among the sectors and groups-see below for more
S&P 500 (SPY) Distribution day in volume and closed right on the fast moving average. 182.00 support to hold. Subscribers: Negative Pivots in all
Russell 2000 (IWM) Will call 114.10 pivotal with 113 underlying support and 115 nearby resistance
Dow (DIA) Could be topping out here but unless it breaks 163.27 could be a one day correction
Nasdaq (QQQ) An open lower and this will look a bit scary. However, over Thursdays high back in business
XLF (Financials) 21.68 is important level to hold
SMH (Semiconductors) Not a pretty beginning but at least not an island top. 41.45 area big support
XRT (Retail) Never made new highs with the market but overall, phase still bullish. Big eyes here for next direction
IYT (Transportation) Big drop from the highs. 128 is the underlying support
IBB (Biotechnology) Better shape with sideways consolidation and still possible to see 230-235 if holds 225
IYR (Real Estate) A messy chart but in its bear phase, vulnerable if breaks 62.00
XHB (Homebuilders) Bullish here for 2014 but needs to hold around 32.70
GLD A reversal candle on December 31st in play. Forget logic; it just is
USO (US Oil Fund) Nasty gap lower and immediate jump to near term oversold-will see if can cross 34.60 and if not, still looks lower
OIH (Oil Services) Never made it over the 50 DMA which makes this a weak group for now
XLE (Energy) New highs and a bit of a retreat but in overall good shape
XOP (Oil and Gas Exploration) Weekly and monthly chart ok so needs to clear the 50 DMA on the daily
TBT (Ultrashort Lehman 20+ Year Treasuries) Inside day over the 10 DMA-if closes above 80, should see higher levels forthcoming
UUP (Dollar Bull) If holds over 21.64 like this on the new phase
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) N/A
Category 2: (Pipeline) N/A
Category 3: (Double Up) Positive Phase, Condition 1 through 4, Positive Pivots which means can eitherbuy a 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)
MAS If this clears 23.00 risk is around the 10 DMA and could continue up this year
YOKU Probably an opening range reversal is best now-as it has to clear 2013 highs 32.30 and the risk is a bit far-more day to Miniswng now
BIIB Over today’s high looks better with tight risk to 280 or so
JBLU If holds S1, looks good over the 10 DMA-over 8.88 looks even better
Category 4: (Rip Tide) N/A
Phase Change:
Shorts:
Category 5: Titanic-Bear Phase, Negative pivots, not oversold, Risk R1 or previous day high. Target: Day to swing
NSM Risk is today’s high and under 35.90 makes new lows and not oversold
WFM The risk is the 50 DMA 58.79 and looks ready to go to the 200 DMA
MCD 97.00 is close by risk as this looks heavy especially if breaks the weekly moving average 95.50
RIG 50.07 is max risk and is now back under the 200 DMA as well
Bye For Now!
