As annoying as my constant harping on the Sheep imagery related to market tone may be-I must say-it has kept me patient throughout the correction-or at the very least, given me perspective.
For example, let’s take our friends, the so-called “experts” on CNBC-not naming names mind you. Tuesday, all you heard was MARKET WILL MELTDOWN 10-15%! Batten down the hatches; drop your *#@*& and grab your socks!
I grabbed my imaginary sheep. (Insert the obvious joke). Whilst cuddling, I have thought about the implications of a strong US Dollar and its effects for the economy-something I have written about in the past.
First off, the small caps, Russell 2000s, separated from the herd and rallied back over the January 6-month calendar range high.
Secondly, the Transportation Sector (IYT) gained the most percentagewise on Wednesday. Its top holdings are FedEx, Union Pacific and Kansas City Southern, all green with KSU, although under the major moving averages, gaining after a strong reversal candle on Tuesday.
Repercussions are felt though, as both the S&P 500 and the Dow confirmed the warning phases. NASDAQ had another weak day, it’s now closer to the 50 DMA.
Of course, we definitely prefer to see SPY and DIA recapture their 50 DMAs and until they do, hesitant to load up long. In the meantime, keep eyes on the stronger sectors like Biotechnology (IBB), Retail (XRT) and Semiconductors (SMH). Potentially favorable is if the Regional Bank Sector (KRE) can clear 41.06 and hold.
If not, as good Shepherds, prepare for the possibility that as the market internals all sit in the negative zone, even at oversold, we could get even more oversold if the NASDAQ dreary performance is any indication
S&P 500 (SPY) Good we added the 100 DMA which came in at 204.28 now since it held there. Resistance at 206.01 the 50 DMA Subscribers: Negative Pivots in all except IWM
Russell 2000 (IWM) Held the 50 DMA, closed green and over the January Calendar Range high-can it lead the others?
Dow (DIA) 176 is the 100 DMA and 177.72 the 50 DMA-declining in slope
Nasdaq (QQQ) 104.48 the 50 DMA and 106.00 the point to clear
XLF (Financials) Inside day and unless it moves well tomorrow, see the 200 DMA next at 23.47
KRE (Regional Banks) Much stronger than XLF-could actually fly if can clear over 41.06
SMH (Semiconductors) The 50 DMA is 55.05 which has to hold now-corresponds with January Calendar Range high
IYT (Transportation) Marginally cleared 160. Positive sign if this can get going over the 50 DMA or around 161.55
IBB (Biotechnology) Inside day with 340 pivotal
XRT (Retail) Has to clear 98.45 to negate the topping candle. Otherwise, under 96.15 breaks the 50 DMA
IYR (Real Estate) Another narrow range day sort of in the middle of nowhere-under 76.70 in trouble
ITB (US Home Construction) Wouldn’t discount this group concerning strong US economy and dollar
GLD (Gold Trust) 110 is the 2014 low area and under that see 100 possible
GDX (Gold Miners) Possible reversal pattern if confirms
UNG (US NatGas Fund) Looking better over 14.53 to a pop maybe up to 17.00 with a risk now to under 13.50
TAN (Guggenheim Solar Energy) Over 43.03 looks better otherwise waiting til around 40.00 to re enter
TBT (Ultrashort Lehman 20+ Year Treasuries) TLTs if hold now over 126.35 could see a move up to 130 area the 50 DMA
UUP (Dollar Bull) Just about par with the Euro on this parabolic move
EWW (Mexico) Subscribers: Possible reversal bottom with good risk if does
EWG (Germany) Could be done selling off if holds Wednesday’s lows
FXI (China Large Cap Fund) Only like if gaps over 41.06
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:
MNST 135 is support and over 136.85 R1 to clear for a miniswing
CIEN For a swing trade risk to 20.00 max and has to clear 21.07 R1
FCS Has to clear 18.23 with max risk the 10 DMA
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)
ROST Like on an ORR above S1 for a day to miniswing
BKD ORR preferred above 36.50
KSS Day to mini only if holds 73.00 and clears 74.00
Category 4: (Rip Tide) Oversold (2 or more days under FTP), Condition 4, Needs to clear R1, Risk previous day low unless noted differently, Target- Day to at least 3 ATRs from entry:
WFM Max risk is the 50 DMA at 53.50 if clears R2 for a swing (54.80)
Phase Change:
CCUR: Over 7.16 clears calendar range and the 200 DMA for a swing trade stop under 6.50
Shorts:
Category 5: Titanic-Bear Phase, Negative pivots, not oversold, Risk R1 or previous day high. Target: Day to swing
ILMN Under today’s low could be ready to see 179.70 the 200 DMA-miniswing
GEL Under 42.70 like for a mini to swing risk 45.00 with target of 36.00
LRCX Inside day, 100 the 100 DMA risk 79.50 and can see 74.55 as target with mini to hybrid trade
BBBY Under 73.20 on weakness swing trade risk about 1.5 ATRs to the 10 DMA and see if can get a good move south to 68.00
Category 6:N/A
Best Best wishes for your trading,
Michele Schneider
