Quote from last Thursday’s Daily: “The market remains in a firm bull phase, which is comforting at this point. That doesn’t mean we can’t or won’t see a move to test the underlying 50 day simple moving averages.” Tweet from last Friday: “The key reversal 5/22, the boxed in range since then, now the close at the low end makes for extreme caution heading into next week.” Even the strong sectors are impacted when the rush to the exits happens at the end of a week and month. Rates firming along with the US dollar, a round of lukewarm economic numbers and nary a peep from the Federal Reserve, all gave the market a Hunter S. Thompson Fear and Loathing Conclusion. Going into this week, not exactly recommending a short position in the indexes; after all, they remain in bull phases. But, with now 4 significant distribution days in volume, the warning is confirmed. Best advice besides finding equities that have entered into negative phases that one could short, is to wait out the flush for a new buy opportunity with low risk. It could mean the indexes hold the 50 DMAs, it could mean they break them, get super oversold, and then return back through.
S&P 500 (SPY) 4 distribution days in volume over the course of 2 weeks and a close under the low of the “boxed-in” range certainly carries obstacles for this index. 160 is huge support given the runaway gap began from there and it’s where the 50 DMA lives. Could it comeback? Sure. But it will have to start with a close back over 164.00 Subscribers: Negative Pivots in all indexes
Russell 2000 (IWM) Not nearly as ugly as the SPY for a couple of reasons. First, the volume has been light-no distribution days to speak of. Second, it remains in the boxed-in range. Therefore, as the go-to index with the ever important small caps, 96.50 key support and a move over 98.50, especially on a closing basis, positive.
Dow (DIA) 151.55 pivotal
NASDAQ 100 (QQQ) Like the Russells, held the bottom of the range 73.00. Ominous if it gaps below there Monday.
ETFs:
GLD A classic case of following the phase. After the gap up last Thursday that almost had it looking like it was suspended in midair, it gapped lower on Friday, then continued southbound.
XLF (Financials) In spite of everything, closed out the month over the 80 monthly moving average, first time since 2003
IBB (Biotechnology) Held 179 support for what it’s worth
SMH (Semiconductors) Naturally it sold off along with the market. But, held onto 38.00. Let’s see what happens this week.
XRT (Retail) 77.00 held for now but now has to clear 78.00 on a closing basis to return confidence
IYT (Transportation) Although this broke 113, it is now approaching support levels from mid-March
IYR (Real Estate) In hindsight, it screamed correction at the market long before everything else did. Now, oversold.
USO (US Oil Fund) 32.00 area of support
OIH (Oil Services) It failed 43.80 the last day of the month, which is disappointing, but also a reason to look at the 50 DMA 42.85
XLE (Energy) Gave up 81.00 now looking at 79.00
TBT (Ultrashort Lehman 20+ Year Treasuries) Not quite a key reversal candle, but interesting sell off at the end of Friday’s session
XOP (Oil and Gas Exploration) Not a great sign to see a close back under the weekly trendline breakout. Watch to see if 60.00 can hold
UUP (Dollar Bull) Bounced a little after testing the 50 DMA. Looking to see if this support holds
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) 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:
YELP Held up well with Friday’s high lined up with the 10 DMA and a good risk to 29.50
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)
AMZN Holding the 10 DMA. Max risk is 266. A close over 270 would be a good sign
INTC Has to clear 24.50 on a closing basis and hold 24.00 now
BSX Cleared the 80 monthly moving average so still very much a contender should 9.14 hold
Category 4: (Rip Tide) N/A
Phase Change:
BEAM Landed on the 50 DMA and oversold. 64.83 now max risk and want to see it clear R1
KSS Held up well. 51.00 support and max risk with 51.70 the 10 DMA to clear especially on a closing basis
PM Tested the April bottom and now real close to the 200 DMA therefore worth watching
AWAY 30.32 the 10 DMA now max risk with the 50 DMA at 31.10
Shorts:
Category 5: Titanic-Bear Phase, Negative pivots, not oversold, Risk R1 or previous day high. Target: Day to swing
DE Unconfirmed warning phase with risk around 88.00 to see move to the 200 DMA or lower
ACE 90.00 good risk and under 88.00 could see bigger move down
WLL 47.00 area good risk. For a possible move to 38.00
PANL 30.50 now good risk and a break if 29.29 should see move to 27.00 or lower
