It’s tempting to remark on the potentially harmful yet more than likely ephemeral impact of speeches and economic data on the resilient market, but for objectivity’s sake, let’s just stick to the technical signals (and of course, sheep and wolves in sheep’s clothing).
I began this week with a hyper focus on the financial sector for good reasons. The XLF ETF has lagged the overall market, eluding 24.90 the January Calendar Range high. As I have written many times before, I am no economist, but looking at the US Economy, seems to me that a healthy banking system (until the day Bitcoins rule) is tantamount to a sustained rally in the stock market from these levels.
I welcome any of my readers who are indeed Economists to chime in via email or tweet!
With that said, looking strictly at the numbers, key points in XLF as it consolidates (trades sideways in a range) since its reversal candle low on February 2nd, are the 50 Daily Moving Average at 24.15, the highs since the 02/02 low 24.60 and finally, 24.90-the 6-month January Calendar Range high-which remains the holy grail to clear on a closing basis. Tuesday’s session turned out as an inside day, or when the trading range of the day is inside the trading range of the day prior.
With all the complexities of the market-geopolitical issues, mixed earnings results, scare tactics of the media, and the soon-to-be most important ever jobs number coming to a theater near you this Friday, I find solace in the simplicity of watching XLF.
We witnessed the first real “wolf on the prowl” during Tuesday’s session. The sheep got nervous naturally, since this is the closest danger they have been in really, since the beginning of 2015 when the S&P 500 swooned 3 times down to the steadily inclining 200 DMA. In comparison, this looks like even a way gentler correction. Yet, always good to review the classic signs of a top in case the entire wolf pack shows up.
1. Island top-not possible since no gaps higher in the indices to defend.
2. A blow off top depicted with at least double the average daily volume onto new highs.-Volume lately has been scant so unlikely.
3. A new 60+ day high, followed by a close in the lower 25% of the intraday trading range, which must confirm the following day with a move and close below that level.-Seemed more likely early on in the session; however, all indices recaptured their intraday lows to close firmly above.
4. Double and Triple Tops-not seeing that yet either
5. Phase change to warning with acceleration, confirmation and volume-nope.
Yours,
A Shepherd
S&P 500 (SPY) Held the fast moving average and channel high-still in gear for now and better over 211.79 Subscribers: Negative Pivots in all
Russell 2000 (IWM) 122.55 swing point with over 123.25 great and under 122.25 troublesome
Dow (DIA) Looked so bad last Friday then recovered-doesn’t look as bad after Tuesday-trouble?
Nasdaq (QQQ) 108 key support although could see 106 and still look good longer term
XLF (Financials) We need to see this over 24.60 then 24.90 the January Calendar Range high
KRE (Regional Banks) 41.06 the January Calendar Range High to clear
SMH (Semiconductors) Possible reversal if closes weak Wednesday after making a new high on Monday
IYT (Transportation) really needs to clear high from Monday 163.66
IBB (Biotechnology) Still looks good going sideways with buying coming in on dips
XRT (Retail) Possible reversal after making a new high although definitely needs to confirm
IYR (Real Estate) Finding some support for now
ITB (US Home Construction) Look here from last week if you want to see what a confirmed top looks like
GLD (Gold Trust) Support at 115
GDX (Gold Miners) 20.00 the major support at this point to hold
USO (US Oil Fund) Light volume range-bound unless it clears 18.79
TAN (Guggenheim Solar Energy) Gapped higher and yet, some digestion now would probably be good
TBT (Ultrashort Lehman 20+ Year Treasuries) Through 45.75 see 47.25 next resistance
UUP (Dollar Bull) Took out the channel but sitting at the top of it
EEM (Emerging Markets) Has to clear 41
FXI (China Large Cap Fund) I have mentioned the “gappiness” of this ETF making it hard to manage-did that today
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:
FB Has negative pivots but closed above them. Like this over R1 80.02 and can use the pivots for a risk
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)
***NOTE: When a stock has a breakaway gap post earnings, good to watch the range of the day after, then buy the breakout of that high for a swing-2 on watchMNST CSC
BKD Inside day with slightly negative pivots so has t clear R1 now to continue move up-looks bullish
GT 2 Inside days. Risk for swing is the 50 DMA for a daytrade to mini is today’s low
EBAY Inside day and needs to move over 58.58 R1 with the outside day 58.66 to clear with risk to todays’ low for a miniswing
AMZN Perfect daytrader if holds 381 -could see 400 or higher
Category 4: N/A
Phase Change:
PSX Inside day over the 200 DMA for an unconfirmed Accumulation day. Risk to today’s lows max
KORS Has to clear the 10 DMA now for a minsiwing against 68.00 area
TEX A fave over R1 27.27 for a miniswing against S1-would not risk more
TSLA Over R1 201.42 good tight risk to 200 area
AFL 62.00 now the area of support to watch
SLB Waiting to add over 85.65 with risk for all at today’s low
Shorts: SINA DTV
Category 5:N/A
Category 6:N/A
Best Best wishes for your trading,
Michele Schneider
