The Interest Rate instrument TLTs, have taken on a Shepherd’s role, seemingly holding up its staff for low rates. The market, which began the week as entertaining and fascinating, Tuesday became annoying seeing as low rates continues to have a double edged sword interpretation.
Seems clear that the advocates of low rates support the idea of helping stabilize commodities prices (particularly oil and gold) so that the overall market avoids getting too spooked about deflation. On the other hand, the FED holding down rates also spooks the market since it speaks to the fear of deflation and a lack of faith in global economies (which of course makes sense with supply/demand so low.)
This is precisely why I am framing the 3/22/15 daily-at some point, the rubber band will snap-I’m thinking that could happen towards the end of the summer early fall when the US turns its eye to the Presidential campaign and the “what if…” mentality.
In the meanwhile, all indices continue to digest recent gains, yet with sloppy action and low volume (that’s kinda good news actually). NASDAQ had buyers around the 108 area, which for now means that hump day should elucidate whether or not it wants to sail from that level, or break it and keep the correction going.
Granddaddy Russell 2000s has clearly performed well as patriarch of the Economic Modern Family. From the trading action we see in the three other indices, not much can be ascertained just yet other than what seems obvious-correction, grazing, no sea change.
Retail XRT holds the honor of matriarch. Transportation IYT slipped back to an unconfirmed warning phase in its role as the temperamental spawn. Biotechnology IBB, began the week naughty, but does appear to be finding some stability with the underlying, upward sloping 10 DMA to catch it.
Semiconductors SMH after the inside day, broke 57.15 but also has an underlying support area if the 10 DMA turns out to behave like a Tempurpedic. One does not bounce on those mattresses, rather finds forgiving yet firm mattress support.
I hate to pick favorites, but I have to admit I’m partial to the Regional Bank Sector (KRE). Although it broke the 10 DMA, I look at its foibles as buy opportunities and welcome them.
Remember, in the Year of the Sheep I am not expecting sustained gallops or bucks. For the most part, I do expect quiet and fairly boring yet necessary grazing.
S&P 500 (SPY) 208 support then 206.75 with resistance 211.27. Subscribers: Pivots Negative in all
Russell 2000 (IWM) Lets call 123.50 the place to hold should the market get more selling coming in but for the runaway gap to hold the area of support to hold is 125.31
Dow (DIA) 179 great underlying support
Nasdaq (QQQ) I still feel Déjà vu-like looking at the performance of IWM in 2014-it had never cleared to new highs and eventually told the tale for the start of every correction. 108 support, then 107 and 109 point to clear
XLF (Financials) 24.10 the key support
KRE (Regional Banks) Calling 41.06 pivotal
SMH (Semiconductors) Could see 55.50 if cannot get over 57.15 and hold over it early on
IBB (Biotechnology) 353.25 is the mattress 10 DMA to hold
XRT (Retail) 99.55 underlying support should this take some rest
ITB (US Home Construction) closed above 27.83 and has potential for new highs
GLD (Gold Trust) Bottoming formation seems to be in place and playing out
GDX (Gold Miners) We will call 20.00 pivotal after the impressive run
USO (US Oil Fund) 17.00 next hurdle with 16.00 the new support
XLE (Energy) Stuck under the 50 DMA and over the 10 DMA
TAN (Guggenheim Solar Energy) If this ever gets a decent dip-buy it
TBT (Ultrashort Lehman 20+ Year Treasuries) TLTs look good over the 50 DMA Check out JNK if holds 39.08
UUP (Dollar Bull) The 50 DMA comes in at 25.23
EEM (Emerging Markets) So many country funds look like this one-basing action over January highs
EWW (Mexico) Now, until it takes out the base its been trying to forming since December, will wait
EWY (South Korea) Over 58 should continue
RSX (Russia) At this point, has to clear 17.40 and hold
CORN (Corn) Unconfirmed phase change to recovery
BAL (Cotton) Subscribers: Wait for futures to clear the 200 DMA at 64.65
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:
BKD has to hold today’s lows and clear pivots 38.19 then R1 38.39
IR If holds todays lows, like over 68.36 for a mini to swing
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)
TXT Has to hold 44 with a move over 45.20 good to new highs perhaps-mini to swing
Category 4: N/A
Phase Change:
TEX If holds today’s lows, like over today’s highs for a mini to hybrid
KORS Inside day under the 50 DMA-has to clear 68.58 for a mini to hybrid risk
LVS Inside day under the 50 DMA making 55.89 pivotal. Good risk 55.30 for miniswing
THC Inside day and now has to take out today’s highs and hold the 200 DMA
Shorts:
Category 5: Titanic-Bear Phase, Negative pivots, not oversold, Risk R1 or previous day high. Target: Day to swing
DTV A gap lower under today’s lows would follow on a 5 minute OR-otherwise, the risk is 86.55 for a swing
DD A gap lower under today’s lows would follow on a 5 minute OR
Category 6: N/A
Best Best wishes for your trading,
Michele Schneider
