The week begins with firming rates, a decline from the top of the trading range in the Dow or DIA, though not nearly significant enough to say the falling TLTs(20 Year Treasury Long Bonds) had much to do with it, yet clearly, the rates had an impact on commodities prices.
All of my Economic Modern Family members acted well. Regional Banks (KRE) love higher rates, even closing on a new 2015 highs. The Russell 2000s (IWM)were the green representative of the 4 indices, but really, Grandpa-not enough to clear the 50 DMA.
Retail (XRT) Granny did okay. Over 100 will get her to the mall. Where she shops will be more determined by the plethora of retail chains reporting earnings this week.
Semiconductors and Biotechnology chopped around with nothing ventured, nothing gained-forgive me-recycling titles. Transportation (IYT) emerged with more identity crises. Do Trannies want to break down under the 200 DMA back to recent lows or clear the 50 DMA and join the siblings in their bullish phases?
Another day watching the family for our best macro picture “tell” kept us from over or even underreacting to the overall low volume trading range action.
I will venture to say that the day can be interpreted as positive-it’s the 2015 version of positive though-the one where we witness the habits of sheep, which can be pretty boring but henceforth predictable.
Like watching ticks on the radar screen and hoping the market goes up or down, watching sheep and imagining them jumping a fence or heading to slaughter can be more anxiety provoking since it’s not something they do unless you don’t want them to. That’s the nature of the current trading range. Neither the bulls nor the bears who are actively counting sheep, are getting what they want when they want it.
S&P 500 (SPY) 212.48 is the high of 2015. Trading range alive and well with 210 next support. Subscribers: Negative Pivots in all except IWM
Russell 2000 (IWM) 123.87 is the 50 DMA-has to clear or market will continue to stall
Dow (DIA) 182.68 the 2015 high or again, like SPY trading range with support at 179.90
Nasdaq (QQQ) Bears will see a bearish engulfing pattern. Bulls will see a marginal drop into support.
XLF (Financials) So typical of 2015. Makes a new high then retreats from it
KRE (Regional Banks) For us, best news of the day-over 41.50, new 2015 closing high but certainly not a new high-still needs to happen
SMH (Semiconductors) Dull doji day but holding the bullish phase
IYT (Transportation) 156.40 now pivotal
IBB (Biotechnology) 350 pivotal
XRT (Retail) Inside day
IYR (Real Estate) One that does not like the firmer rates.
ITB (US Home Construction) Has to clear 27.30 to be good
GLD (Gold Trust) That negative slope in the 50 DMA has prevented us from even looking at trading this right now
GDX (Gold Miners) Watching with interest
USO (US Oil Fund) Over 20.60 the bears will be wrong
XOP (Oil and Gas Exploration) Tested and held the 50 DMA
TAN (Guggenheim Solar Energy) long term bullish
TBT (Ultrashort Lehman 20+ Year Treasuries) Closed over the 200 DMA-first time since January 2014
EEM (Emerging Markets) Monthly chart has huge consolidation going back to 2011
EWP (Spain) Starting to look better longer term with an inside day Monday
CORN (Corn) Like over 23.40
DBC (DB Commodity Index) Inside day-Like better over 18.25
SGG (Sugar) Cash $13.50 next hurdle
PHO (Water) Want to see this clear 25.50
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
***Market Tone: Short-term Neutral, Intermediate-Term Positive 4, andLong-Term Positive 9, aggregate makes it a positive 13. We have 11 longs which seems like plenty given trading range NOTE: Market Tone is updated before the open each day and reported to you on twitter.
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)
Focus List Daytrades: PAY FFIV
ADI Slightly negative pivots-interesting that the pivots and R1 line up at 62.88 so only that has to clear after an inside day. Risk is to 62.40 for a miniswing-look at for 5 or 30 minute OR
DE Like for an ORR best to control risk. Risk is to 88.90 mini to swing if sets up and wouldn’t chase on a breakout
Category 4: N/A
Phase Change:
DECK Reports 5/28 Inside day with a positive slope on the 50 DMA. Max risk 74.25 like over 76.12 for mini to swing. Can do a an ORR over 74.30 or a 30 min OR
Reversal Trades: N/A
Shorts: Focus List Daytrades: BBBY BIDU
Category 5: Titanic-Bear Phase, Negative pivots, not oversold, Risk R1 or previous day high. Target: Day to swing
QCOM Has to break 68.50 and not clear 69.50-good for a mini or daytrade depending on how it sets up-watch a 5 min, 30 min or even ORR since pivots are negative
Category 6: N/A
Best Best wishes for your trading,
Michele Schneider
