Generally, I do not tune in so much to the “opinions” of talking heads or even a lot of analysts, fundamental or technical, as I typically find the charts tell me everything I need to know. Once other opinions come into the mix, my “vision” becomes “blurred.”
With that said, last week, I wrote a lot about the dichotomy surfacing with a market on new highs and thevolatility index forming a solid base, suggesting some wild times ahead. Historically, volatility blows out when the market experiences a hard correction.
I thought using the Rocky IV allegory would be somewhat original in describing the tensions that exist in Russia and the Ukraine, but John Kerry, US Secretary of State, mentioned it as obvious, “We do not believe this should be an East-West, Russia-United States. This is not Rocky IV, believe me. We don't see it that way."
In "Rocky IV," the title character travels to the Soviet Union to take on Soviet boxer Ivan Drago. I’m not sure if Kerry was trying his hand at levity, or whether he had Oscar night on his mind; regardless, the real point is that the now more obvious reason for the dichotomy with the volatility index and a strong US market has indeed surfaced.
The market hates uncertainty. Therefore, looking just at the Dow (DIA) chart (which filled the gap to 162.79 and closed above it) one would say the market did what it had to do and remains poised for higher. However, dramatic political news or social unrest will supersede the technicals, forcing most investors out of their comfy technical bubble. And then there’s the VXX (Volatility Index).
S&P 500 (SPY) New high close with strong volume-accumulation. Also, a unique situation in not being overbought. Subscribers: Positive pivots in all
Russell 2000 (IWM) Closed red but not weak enough to call it a reversal candle after making new highs. However, a gap down Monday not defended with buying, would be reason for caution.
Dow (DIA) Filled the gap as mentioned and now has to defend the Friday low
Nasdaq (QQQ) Closed red with a doji candle (open and closing prices virtually the same). Like IWM, what happens early Monday will be more telling.
XLF (Financials) Confirmed the bull phase and has to clear 21.75 to move away or defend the 50 DMA to stay a contender
SMH (Semiconductors) Sideways congestion strong chart
IYT (Transportation) bull phase and has to clear 132.97 to continue
IBB (Biotechnology) First time this has broken the fast moving averages since the beginning of February. Needs to repair therefore could go lower first
XRT (Retail) 88.26 January calendar range high far away. With 85, near term, area to defend
IYR (Real Estate) New 2014 highs and looking firm
XHB (Homebuilders) With overbought conditions, could correct a bit from here with 33.00 underlying support
GLD 126 the ultimate support with a move over Friday’s high positive
USO (US Oil Fund) Hasn’t been over 37.50 since October 2013-finding that area resistance but doesn’t look like it for long if holds over 36.20
OIH (Oil Services) Strong move Friday but into some resistance at 48.95
XLE (Energy) Strong with Friday low important to defend
XOP (Oil and Gas Exploration) Cleared 69.50, now has to hold 69.00 and take out 70.00
TBT (Ultrashort Lehman 20+ Year Treasuries) 68.12 the low of 2014 thus far
UUP (Dollar Bull) 21.32 is the 2013 low
EEM (Emerging Markets) Subscribers: Went back to a bear phase unconfirmed giving another shot to short if fails to rally over 39.55 the 50 DMA
KRE (Regional Banks) confirmed bullish phase
EWG (Germany) 31.93 the 2013 high
FXI (China Large Cap Fund) Subscribers: Exited quickly since it could not clear the 50 DMA
TAN (Guggenheim Solar Energy) Might be ready for some correction
CORN (Corn) Subscribers: Loving the base and looking to add if holds around the 32.50 level
BAL (Cotton) Subscribers: Most interesting aspect is the clean risk to under the 50 DMA 53.70 now if clears 54.75
JO (Coffee) Subscribers: 36.02 recent highs
FCG (First Trust ISE Reserve NatGas) 19.50 the 50 DMA
SGG (Sugar) Subscribers: If holds Friday’s low, would look for a low risk entry against that low especially if clears 59.00
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
**NOTE: Monday will be an important day to watch the indices and sectors before committing to a new swing trade in equities.
Category 1: (Aloha)N/A
Category 2: (Pipeline) N/A
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)
CNQ 36.30 is good tight risk with a mover over 37.03 good
CNX Inside day with risk to Friday low and over 40.21 good
WFC We took off the add but held the core and now looking for it to defend 46.00 and take out 46.84
WLP Over 92.00 looks great and needs to hold 89.00
YUM Defended 74.00 and if opens well above see the first target approaching. Under 73.00 will be more cautious
Category 4: (Rip Tide) N/A
Phase Change:
DRI 50.81 the 50 DMA to defend with a move over 51.25 looking strong
RKUS Converging moving averages with an inside day which means has to clear 14.26
AFL Unconfirmed phase change to bullish if holds 63.98
CREE 62.35 clears the converging moving averages with 61.40 a good spot to risk to
CYH Watch this for a move over 42.72 the 200 DMA
OI Held the 50 DMA which means if 33.79 holds tomorrow, then look for a tight entry over 34.00
SODA Under 38.60 expect to tighten the stop and has to clear Friday’s high to look a lot better
AXL Friday range important-keeping on list to see which way it breaks
Shorts:
VXX Plan to have 2 stops ½ and ½ (unconfirmed phase change to recovery)
Category 5: Titanic-Bear Phase, Negative pivots, not oversold, Risk R1 or previous day high. Target: Day to swing
CELG Has to break S1.
MR Under 34.65 good short with risk to around 35.65
Bye For Now!
