Let’s start with the obvious observation from last week. The Russell 2000s could not confirm back to bullish and wound up closing out the week in a warning phase, marginally holding onto the 200 DMA. As the market internals remain bullish in the S&P 500 regardless of Friday’s action, one can look for 2 possible scenarios to begin this week.
One-the small caps gap higher off the 200 DMA and we all go back to spying the 50 DMA. Two, it either opens near the closing price on Friday and works lower or worse, gaps lower beneath the 200 DMA and then keeps going south. It opens lower and works its way higher closing green. Okay-that’s really 5 scenarios.
The biggest loser (maybe not the biggest percentage wise, but from a new highs then collapse story)Semiconductors. Although they are holding the runaway gap low thus far from 6/13 and thank goodness we are not looking at a massive island top, damage is done definitely. Irreparable? Doubtful depending on how far out one looks.
Third tell, interest rates-after two days of firming action (incidentally, TLTs and other instruments in bullish conditions often see 1-3 days of correction before they turn back around) closed on new 2014 highs.
Examining my 3 focus sectors: Regional Banks (KRE)-remain under the 200 DMA but held up regardless, leaving us watching that moving average closely. China (FXI)-outstanding week by anyone’s standards, closing out on new 2014 highs. Solar Energy (TAN)-the ETF struggled but companies like Solar City and First Solardid well. Jury still out there.
One thing I will look for-when the equities get cheaper, the tough go shopping-always a relief to see the high momentum stocks trade closer to clear risk points. Even with the misses, this earnings season has produced 80% revenue beats on those that already reported!
S&P 500 (SPY) Held the fast moving average. Subscribers: Negative Pivots in all
Russell 2000 (IWM) Marginally held the 200 DMA
Dow (DIA) 168.20 the 50 DMA to watch
Nasdaq (QQQ) Held the fast moving average with 96.30 pivotal
XLF (Financials) Held the fast moving average-not out of the running yet
KRE (Regional Banks) Inside day under the 200 DMA-worth watching
SMH (Semiconductors) Oversold and near the 50 DMA
IYT (Transportation) Could be a reversal pattern but does have support on the way down
IBB (Biotechnology) Held up fairly well with 260 major resistance
XRT (Retail) Yup, one day wonder last Thursday
IYR (Real Estate) 73.00 pivotal-as in might need a rest under that level
ITB (US Home Construction) Messy
GLD Moment of truth on the moving averages pointed up! Island top remains intact though
Metals and Mining (XME) Over 42.33 looks better Subscribers: with risk to 41.80 or so
USO (US Oil Fund) Rough start on Friday, better finish-like better over 38.00
TAN (Guggenheim Solar Energy) Subscribers: Looking at longer term and trying to ignore the noise-still see major upside just a matter of when
TBT (Ultrashort Lehman 20+ Year Treasuries) New lows for the year
UUP (Dollar Bull) First time in almost a year this has stayed above the 200 DMA
JO (Coffee) Subscribers: confirmed phase change to bullish
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
*NOTE: If the risk to the 50 or 200 DMA is more than 1-2ATRS of risk, assume that the trade is a miniswing trade. Swing denoted with a * Also not including anything that reports within 3-4 days of writing list
Category 2: (Pipeline) N/A
Category 3: (Double Up) Positive Phase, Condition 1 through 4, Positive Pivots which means can either buy 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)
*EL Reports 8/15 The 10 crossed over the 50 DMA which is a condition change. Has negative pivots so now must cross R1 and hold Fridays lows
Category 4: (Rip Tide) N/A
Phase Change:
LGF Day to swing depending on risk setup-over 32.24 looks good to 33.60 last swing high and perhaps beyond
AXL Reports 8/1 Before Open A fave miniswing golden cross, price is close, outperformed market and R1 and Friday’s high line up. Risk 18.95
DDD Reports Before Open 7/31 so not much time, but over R1 like with risk to 52.24 for a quickie day to miniswing trade
*ODP Reports 8/5 before open Like to see 5.00 hold
*FSLR Reports 8/6 The 50 DMA is at 64.65 which if clears gives this a risk to the low of when that happens-longer term like this stock (solar) and esp. if after earnings clears 64.50-65. Longer term can see 107-108
Shorts:
**NOTE: Thinking that we should use daytrading risks on shorts and only carry overnight if closes in our favor-while market in bull phase
Category 5: Titanic-Bear Phase, Negative pivots, not oversold, Risk R1 or previous day high. Target: Day to swing
OXY Reports July 31st. Good day to mini if stays under the 50 DMA at 100.65
CHK Reports 8/6 before open Broke the 200 DMA now risk at 27.35 with potential of 25.50
Category 6: White Cap-N/A
