Baby Begs For A Cookie, Throws It On The Ground
Last night, our family came to stay with us for the next month or so. In tow, is our almost 8 month old grandbaby. What is fascinating to observe is how long-term memory develops from infant to toddler while the baby simultaneously continues to live in the moment.
Even more fascinating is how as adults, our long term memory often grows stronger-remembering events that happened years before-but our ability to live in the moment or even remember events moment to moment wanes, especially as we age.
Trading the market requires both long and short term memory of course. History indeed repeats itself, which is why technical analysis, as far as chart patterns in particular, are reliable as story tellers of the past, hence harbingers of the future.
Living in the present though? Easier said than done for traders. What defines the present? Does the present stand alone?
2015 has been counterintuitive so often. Buy weakness, sell strength. That has defined the present yet also shows the present doesn’t stand alone since the phases, generally bullish since 2013, suggest that trading counterintuitively from the long side makes sense-for now.
Let’s take the new highs in the Dow. Monday and for part of the day Tuesday, the Dow went on to make yet another new high.
Day traders think moment to moment while swing traders may watch their positions moment to moment (not really best way to spend your time), but we assume have positions that are more reflective of the past with much wider stop and target parameters.
And that’s the rub. Swing traders, utilizing long term memory, have anticipated the bullish phases will endure this year and if used wide enough parameters, might finally be getting a payoff long the Dow. (Using the breakout in February, you might be long the Dow from 180 and now up only 2-3% max)
Generally speaking, living in the moment in 2015 has been awesome for day traders. For swing traders, much more challenging. Let’s face it, the past and the present are like yin and yang, not mutually exclusive of one another.
So, with the Dow making new highs early on Tuesday, we saw it barely hanging on by the end of the day while the other indices closed slightly red.
Our 8 month old, who is developing a memory while continuing to reach out for the nearest stimulus, might think that rallies are hard to trust.
And if we all start thinking that way, the “herd” self-fulfilling prophecy translates to, rallies ARE hard to trust.
The bedtime story I continue to read (write) to you is about sheep and ModernFamilies for a reason. My goal is to try to help you see the Dow and my other anointed 6 ETFs for what they are-longer term sheepishly positive, shorter term prone to skittishness and moment to moment wavering between grazing and scattering.
S&P 500 (SPY) A year ago the breakout projected a move to 220. Now, feasible but not guaranteed. Subscribers: Positive Pivots in all
Russell 2000 (IWM) Grandpa! Confirmed bullish phase with an inside day.
Dow (DIA) New high intraday and close with a doji day. Baby needs a runaway gap.
Nasdaq (QQQ) Has room to the top-111.16. I figure by the time it gets there, SPY DIA will look really overbought.
XLF (Financials) New 2015 highs
KRE (Regional Banks) Sister: Not very big, but it is a runaway gap!
SMH (Semiconductors) Brother: Just needs to hang out and not selloff
IYT (Transportation) He/She Sib: Could not hold the 200 DMA so if breaks Tuesday’s lows, looking aback at 152 to hold
IBB (Biotechnology) Brother: Just needs to hang out and not selloff
XRT (Retail) Granny: Inside day just shy of the 50 DMA which must clear
IYR (Real Estate) 75.75 support Over 77 see at least to the 50 DMA
ITB (US Home Construction) Unconfirmed bullish phase
GLD (Gold Trust) If you recall my video last week, said until this clears 120, the bottoming action could be choppy or even suspect. 115 key support to hold
USO (US Oil Fund) 18.75 far but best support and over 20.00 stands a better chance to resume up
XLE (Energy) Touched the 50 DMA needs to hold that low of Tuesday
TBT (Ultrashort Lehman 20+ Year Treasuries) Rates rising are part of what’s stalling the rally in equities-stalling though not reversing
UUP (Dollar Bull) 25.20 next point to clear and 24.80 point to hold
EEM (Emerging Markets) Still friendly here
IFN (India Fund Inc.) Cleared the 200 DMA and confirmed with an inside day
EWG (Germany) Looks ripe for higher
FXI (China Large Cap Fund) Look at the runaway gap form April 8th. Still holding
DBC (DB Commodity Index) Close to a perfect risk point if dips more or even holds right around here
SGG (Sugar) Hovering around the 50 DMA
JO (Coffee) Held the 50 DMA.
PHO (Water) Consolidating with an inside day
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 Positive 2, Intermediate-Term Positive 6, andLong-Term Positive 10. NOTE: Market Tone is updated before the open each day and reported to you on twitter.
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:
GD 3 days under pivots with risk to S1 139.62 tomorrow. Has to clear first pivots at 140.15 then R1 and today’s high. Day to miniswing OR05 or 30 Minute
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 about AMZN: We might add some size to the position if clears back over R1 and 10 DMA but then tighten stop and lower profit target. ATR has halved since our entry
JCP Doji day. Have ½ and will look to add using same stop if clears over 8.69. The number of shares will total the $500 risk to the stop
Category 4:N/A
Phase Change:
IBM 172.15 now support near term. R1 is 174.16 to clear now for a day to mini trade-any OR
SODA End of day came back over S1 and Mondays low. Has to hold 21.32 and clear 22.13 R1 for day to mini
Reversal Trades: N/A
Shorts: Focus List shorts: WFM TDC Under S1 or under 40.00
Category 5: Titanic-Bear Phase, Negative pivots, not oversold, Risk R1 or previous day high. Target: Day to swing
CBS Like under S1 for a daytrade risk to 61.04 and if gets traction, stay with some for possible move to break 59.00 and put in a top.
NSC Risk to 98.82 the 10 DMA and for mini-looks like could see 83.50-82.00 over time. OR-any
Category 6: N/A
Best Best wishes for your trading,
Michele Schneider
