So what happened? The FED said they would not take away the bond buying program until theunemployment numbers drop to 6.5%. They also said the economy is improving and that they could start to taper the easing in 2014. Then, Ben Bernanke is set to retire end of this year, yet no official announcement has been made. After the FED made its statement, the rates and dollar rose, and the market began its free fall.Real Estate was never sucked into the morning strength however, opening unchanged and weakening after the first 30 minutes of the day. In fact, I have been writing under the IYR comments, that that would be the first place to go short. Just look at Avalon Bay, Boston Properties, Lennar for example, to see the prudence in that advice. Now what? If one steps back, the reaction today is a mixed bag. There have been some marked improvements in the overall economy, and eventually a stronger dollar and higher rates might not be the worst thing in the world (I know, armchair economist again). In the meantime, uncertainty remains an enemy. From a technical standpoint, phases are bullish in the indexes, but the reversal day May 22nd also remains. Seems best to look at the strongest areas that hold now-semiconductors, retail, and surprisingly, some of the soft commodities like corn, orange juice, sugar and coffee-all of which did well. Oil and Gas is another area to keep an eye on.
S&P 500 (SPY)Closed under the 10 DMA. 162.90 and the upward sloping 50 are offering support. Still maintain that the next trip to the 50 DMA should it continue south, it will most likely go the way of the real estate ETF-down. Subscribers: Negative pivots in all indexes
Russell 2000 (IWM) Was the best performer yesterday, and the only index to hold the10 DMA. Small caps are key here Subscribers: 98.80 first area to clear.
Dow (DIA) Closed under the 10 DMA but above an upward sloping 50 DMA. Like SPY, that could be short-lived. But note, phases still bullish in spite of the FED damage
NASDAQ 100 (QQQ)Closed under the 10 DMA on some support from 5/24 low and a return to a trend line drawn from the 5/22 high. Clearly, those slingshot highs on 5/22 are haunting us.
ETFs:
GLD130 a very substantial area of support-with sentiment still bearish and looking more so now. With rates rising this can drop, although it is getting oversold.
XLF (Financials)Closed below the 10 DMA on support. As friendly as we were, this too might not hold the 50 DMA-unless it can now clear back over 19.90
IBB (Biotechnology) Closed under the 10 and 50 DMA, bring this into an unconfirmed warning phase. Vulnerable for sure
SMH (Semiconductors) Held the 10 DMA today, which we hope is a good sign for this group. But even the mighty fall with enough external pressure.
XRT (Retail) Held the 10 DMA today. But, with a bearish engulfing pattern so, important sector to watch
IYT (Transportation) Bearish engulfing candle today. Closed under the 10 DMA but, holding the 50 DMA, for now.
IYR (Real Estate)Closed under the 200 DMA today which is no surprise considering that it never got too far above it on the pop. This is the sector to find shorts if the market continues its drop tomorrow. Needs to hold 65.79, the slingshot low
USO (US Oil Fund)Top of a 2 and ½ month base. But, could also be the start of a brick wall high.
OIH (Oil Services)Since middle 2011, been forming a pretty good base, but still very much inside of it
XLE (Energy) Held the 10 DMA. But like everything, peaked in May unless we get some good momentum back
TBT (Ultrashort Lehman 20+ Year Treasuries) Bullish engulfing day. Rose sharply on news from the Federal Reserve. June 11th high is the point to clear. Golden cross formed.
XOP (Oil and Gas Exploration) Maybe one of the better looking groups if no more damage is done at this point
XHB (Homebuilders) Held the 10 and 50 DMA.
UUP (Dollar Bull) Watch the 200 DMA now
SGG (Sugar) Subscribers: This is the beginning of the move that we’ve been waiting for! If you’re not in now, you will have a good chance to buy it on the 50 DMA. Patience until then.
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:
GCI this is over the 80 monthly moving average but now with 4 days under pivots, only a move above r1 is reasonable for entry
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)
FDX Matched the highs from May then dropped with the market. Now, today’s low becomes key support and 100.75 closer support
TSLA 102.25 is a decent risk. Since the highs were 115, not a bad one to look at for a miniswing if sets up
OPEN Has to clear 68.00 and hold today’s low. If good, has room to recent highs and beyond
GME Possible it will gap up in the morning over 40.00 the 2013 high. If does, good one to look at for gap rules. Crossed the 80 monthly 3 months ago.
SPLK Inside day. Slightly negative pivots. Has to clear 44.80 which is the high from the recent compression and hold today’s low.
MET Matched the 2013 high then retreated, but overall, still looks good
UA On the list since it well outperformed and is sitting on support. If it gaps lower, forget it. But, if it holds today’s low and works higher, could be good for at least a miniswing trade.
Category 4: (Rip Tide) N/A
Phase Change: N/A
Shorts:
Category 5: Titanic-Bear Phase, Negative pivots, not oversold, Risk R1 or previous day high. Target: Day to swing
DO Unconfirmed distribution phase. 68.57 is a good tight risk near the 200 DMA.
CNQ 29.61 is a tight risk (the 50 DMA) and 30.15 a better one (the 200 DMA). Also has to break recent lows 28.17 to look really bad
CHRW Really wanted to be short this one on the breakdown, but missed it. Now, 57.23 good resistance and watching for an opening range high failure although not oversold
POT Inside day. Cannot clear 41.25 and thinking it could break the 80 monthly for a swing trade down.
Category 6: White Cap-Having a 2-3 Day correction over the pivots. In a Negative Phase, Positive Pivots. Can sell an Opening Range High Failure if happens below R1 or previous day high whatever is higher and/or weakness if breaks S1 and prior day’s lows
JOY Has to break S1 but broke the 80 monthly moving average a few months ago securing a downtrend.
Bye for Now!
