Our tell, the Small Caps or Russell 2000, had a historical day (the whole market really, but let’s focus on that one). After an inside day, it opened unchanged, took out Tuesday’s high; then after what is nearly laughable contradictory information from the FED was released, (laughable only if you weren’t first getting long the market), Bernanke stated he would defend QE3, the market rallied. Soon later, the FED minutes were released indicating that the morphine injections could end soon. Another tell was the short bonds or TBTs. They went down during Bernanke’s statements, but not by very much. The US dollar began to rally. And that was that; the market began to sell off with the last kibosh after the minutes were released, causing the US dollar to rise and the interest rates to fall. What does it all mean? Yes, there is the temptation to cite the old “Sell in May” deal-but-what has changed really? A nasty reversal candle on huge volume? Yes. But like your dear Ms. Prudence always reminds you about-everything needs confirmation-EVERYTHING!
S&P 500 (SPY) Landed on the fast moving average and did indeed have a fall from new highs. 165.35 is the number to watch. Subscribers: Slingshot high only if confirmed and negative pivots
Russell 2000 (IWM) I look at a few technical indicators typically. First, weekly Bollinger Bands-after clearing it Tuesday, a close below by the end of the week would clearly point to a correction. Secondly, volume patterns-in all indexes they were double the daily average which is why today was one to respect. Third, overall trend-which right now remains strongly bullish. At this moment we can wrap it up by stating, possible top in place, but more likely, a good correction which has been overdue.
Dow (DIA) Also tested and closed above the fast moving average.
NASDAQ 100 (QQQ) Tested and closed near the fast moving average and remains thus far, above the weekly Bollinger Band.
ETFs:
GLD Realized today that 130 is exactly 50% retracement from the 2008 low to the 2012 high. That means, if it breaks, a move to 115 or so not out of the question.
XLF (Financials) Like the indexes, huge volume reversal candle in a bull phase that has to confirm.
IBB (Biotechnology) Held the fast moving. If 179 level holds never count this one out completely
SMH (Semiconductors) If this holds around these levels, the first place to jump back in after clearing over a decade’s worth of price action.
XRT (Retail) Negated the bearish candle from last week yesterday, then made a new one today. But holding the fast moving average.
IYT (Transportation) “Under 116 expect some more correction here.” Words from Tuesday. 113 next area of support and probably a good buy.
IYR (Real Estate) Ok, so today was more like a coma than a rest!
USO (US Oil Fund) Been wild in this ETF. Now, back under the 200 DMA and right on the 50 DMA
OIH (Oil Services) a monthly close over 43.80 would be good. A close over 46.00 even better-let’s see just how damaging today’s action was.
TBT (Ultrashort Lehman 20+ Year Treasuries) I’m sure today’s action was way more significant than what we know for right now. But, note that rates rose after FED speak. Notice, what longer term trends emerge from this.
XOP (Oil and Gas Exploration) Even with today’s move, still very friendly to this sector longer term.
UUP (Dollar Bull) Through 22.95 see more upside.
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.
Post Earnings: PETM-watch to see if gaps over 70.71 since could be good breakaway gap for move to 78.00
HPQ 24.05 was the recent high so watch this for a breakaway gap as well
Category 1: (Aloha) N/A
Category 2: (Pipeline) N/A
THRX Beat up but holding a gap if today’s low 35.87 holds and it can clear 36.70 first, the FTP. Over today’s high clears the 10 DMA
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)
USG that’s 3 on list with the same hammer candle with the long upper shadow. Only this one is a condition 1 stock. 27.60 is support to hold and over 28.60 should be ok
FMC Coiled and if clears 63.39 could see another leg up. Risk is the 10 DMA 62.44
PM Interesting hammer candle on the 50 DMA. Neutral pivots. Max risk 93.68 and one to keep eyes on over 94.50
Category 4: (Rip Tide) Oversold (2 or more days under FTP), Condition 4, Needs to clear R1, Risk previous day low unless noted differently, Target- Day to at least 3 ATRs from entry:
THC 44.00 is a good risk as this held up over the 50 DMA with a hammer candle, one with a long upper shadow, which means bulls controlled until the end. Looking at this over 45.25
Phase Change:
FDO Like this one if holds today’s low and can get back over 64.15 area for a longer term move to 72.00 possible
AAPL Hung in there and a good one to focus on over 443.00
Shorts:
Category 5: Titanic-Bear Phase, Negative pivots, not oversold, Risk R1 or previous day high. Target: Day to swing
WLL Back under the 200 DMA with max risk 47.15. Looks heavy
JOY Risk 58.10 and has to stay under the 50 DMA 57.44. Could see new lows if market corrects for awhile
CHRW Back under the 200 DMA, with 60.00 max risk. Also needs to break S1 at 58.62.
Category 6:N/A
Bye for Now!
