After a week we were happy that we corked the champagne and remained sober, last Thursday night I watched a rerun of The Simpsons that goes back to the 1990’s called “Terror at 5 1/5 Feet". That show was an adaptation of the classic Twilight Zone’s “Nightmare at 20,000 Feet.”
In The Simpsons, Bart sees a nightmarish gremlin hanging on the side of his school bus, and he tries in vain to get anyone to believe him.
The end of the show leaves everyone wondering whether or not the gremlin sighting was real or not. I see that similar scenario playing out in the overall market or what we might call “Terror at 18,000 in the Dow.”
The gremlin can easily be replaced with Janet Yellen (no offense meant-just poetic license), with the question, is a Fed Interest Rate hike hanging on the side of the school bus or not?
The Dow closed the week at 17,712. The indices remain divided with NASDAQand the Russell 2000s in Bullish Phases and the S&P 500 and the Dow in Warning Phases. QQQs and IWM are above the critical January Calendar Range,DIA and SPY are not.
In the final fifteen minutes of the week, Intel announced that they are in talks to buy rival chip-maker Altera. That took big brother Semiconductors screaming back to the 50 DMA with a close just shy of it. In The Simpsons episode, Bart dreams of his school bus losing control and being run over by a semi-truck.Semis-end of day rally-real or a dream?
Transportation held the 200 DMA with an inside day and Biotechnologydefended the 50 DMA. Regional Banks found support at 40.00 with a blah end of week performance. Retail closed back over 100 and not too far from recent highs.
At the end of Terror at 5 ½ Feet, the bus makes it safely to school (despite that it's completely wrecked). Bart gleefully announces he was right; however, he still gets shipped to the New Bedlam Home for the Emotionally Interesting. The viewers are left with an unsettling image: A gremlin holding the severed head of a still-smiling Ned Flanders, spinal column and all.
So, is the market going to correct more or rally back to the highs? Will our Gremlin Yellen wreak havoc and if so, will it be withstanding? Is the Gremlin holding the severed head of a market rally or the spinal cord or a correction without body? Are we all ready for the Home for the Emotionally Interesting as we try to figure this out?
S&P 500 (SPY) Inside day. Let’s call 204-208 the new range Subscribers: Pivots Positive in all
Russell 2000 (IWM) If 122 continues to hold, we will look for a move over 124.20 next.
Dow (DIA) Inside day. 173 support and 177.50 resistance
Nasdaq (QQQ) Closed right on the 50 DMA but not enough over it to record an official phase change back to Bullish. It did clear and close above 105.50 with 104 the big support and over 107 getting interesting
XLF (Financials) Inside day. 23.75 support and back over 24.10 much better
KRE (Regional Banks) 40.00 support to hold and over 40.70 way better
SMH (Semiconductors) 55.59 the 50 DMA to clear of fail from
IYT (Transportation) Inside day on the 200 DMA-like over 156.13 risk to the 200 DMA
IBB (Biotechnology) 354 Resistance and 334 major support
XRT (Retail) 100 cleared-good sign ahead of lots of economic data that could impact this group coming up
IYR (Real Estate) 78.50 support
ITB (US Home Construction) Cleared 27.50 and could be the next one to make new highs
GLD (Gold Trust) 115 now nearest support to hold and now a very pivotal area
USO (US Oil Fund) Unconfirmed Bear phase with 17.00 back to support
TAN (Guggenheim Solar Energy) Looking for a new buy
TBT (Ultrashort Lehman 20+ Year Treasuries) TLTs unconfirmed bull phase and inside day so one to watch for range break
UUP (Dollar Bull) 25.58 should hold
BAL (Cotton) See the futures flagging for a breakout
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
***NEW: Market Tone (What Keith covered during the March 25th Live Coaching). It says Short-term Negative 1, Intermediate-Term Negative 1, andLong-Term Positive 3, making the pivot midpoint (positive pivots for Monday) the line in the sand. Breakout over long, under short.
Category 1: N/A
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)
FB 82.00 is max risk for a swing with a move over R1 necessary 83.88 or if clears pivots might set up for a miniswing
SWI Inside day. A fave over the moving averages for a mini to swing over R1 50.83
IR Over R1 now like even more than last week as a return to a condition 1 stock with a risk of a swing to the 50 DMA
AMZN 2 ways to look at it-a buy on the positive pivots against the 50 DMA for a swing, or a move over 373 the 10 DMA for a tighter miniswing trade risk to 370 the floor trader pivots
*ECL 2 Inside days with positive pivots, relative good shape-candidate for a miniswing over R1 and the 10 DMA
LEN In the homebuilders and if holds 49.61 could see a move up especially if ITB firms-52.00 some resistance so look at a miniswing
Category 4:N/A
Phase Change:
FEYE Had a phase change and now has to clear R1 and hold Fridays low
KBH Conservatively, has to clear 15.50 with a swing risk
SODA Over R1 19.52 clears the 10 DMA holds the 50 DMA and has a good risk to around 18.00
KORS Over R1 looks poised to take out the upward sloping 50 DMA-mini to test it
Shorts: Watch DIA to fail S1 for a short of the 4 indices
Category 5: Titanic-Bear Phase, Negative pivots, not oversold, Risk R1 or previous day high. Target: Day to swing
DTV Inside day 86.00 max risk with 84.50 support
Category 6: N/A
Best Best wishes for your trading,
Michele Schneider
