In the April 30th daily commentary, I speculated on 3 possible scenarios for theRussell 2000s that I would be mindful of. To review, 1) IWM sells off just a bit more, maybe even another rush to the exits and then, goes back to rallying testing recent highs. (We saw May 1st open higher with better follow through on May 4th-hardly enough to figure new highs since IWM never cleared the 50 DMA).
2) IWM bounces meagerly from here, the bounce that provides a short opportunity and we see the May adage come to fruition. (BINGO so far!)
3) Probably least likely, IWM consolidates at the low end of the 3 month trading range (or range within the range) and goes into summer doldrums early. (March 10th low is 119.83 so it is still possible that IWM holds there and does indeed continue to chop around, consolidating. It can even go as low as the 2015 low 114.20, but that would be painful. However, it would prove that the pasture or trading range is more like a 5-month range. Currently, the 3-month range has been a range within a range.)
One more note is that 120.56 is the 6-month calendar range high in IWM. On Tuesday, although it traded below that level intraday, it ultimately managed to close above it.
The 6 charts I’ve used to represent the macro picture: Russell 2000s (IWM), Retail (XRT), Regional Banks (KRE, Semiconductors (SMH), Biotechnology (IBB) and Transportation (IYT) and how they rotate from one another yet ultimately stay within the boundaries of the range is where I have focused all year.
So yes, I can say they are all range bound-but have they offered any real clarity? As much as the Dow at 18,000 has, which considering it is back beneath, we can say not too much if you are a trader who looks ahead for more than 1-2 days.
And that’s the rub. Many Commodities (oil, certain metals, cotton, and maybe sugar) have paid off from the basing action. Rates keep firming-that’s still very much worth paying attention to. Otherwise, a scalper’s delight and tough going for trend traders.
Monday night, I did advise we stay calm, but definitely not complacent. And here’s the silver lining potential- NASDAQ did not fail the 50 DMA or Bullish Phase literally until the last minute of the day- where the leading 100 stocks live.
S&P 500 (SPY) What to do when you confirm a bullish phase only to return to an unconfirmed warning phase? Subscribers: Negative Pivots in all
Russell 2000 (IWM) Held the January calendar range low. But closed weak under the 100 DMA
Dow (DIA) Like SPY, confirmed a bullish phase only to return to an unconfirmed warning phase.
Nasdaq (QQQ) 107.55 support held. Then, 105.45. But it this is to lead, then has to take back and now over 109
XLF (Financials) Sloppy but held the bullish phase
KRE (Regional Banks) 40.95 the support to hold and over 41.50 looks better
SMH (Semiconductors) Unconfirmed warning phase and the chart since 2015 began looking like a big crab creeping along
IYT (Transportation) 152 support and unless it gets back over 156.34, could see that support
IBB (Biotechnology) 331.94 support with a move over 350, as farfetched as it sounds, much healthier
XRT (Retail) As much as I dread writing this, 93.00 seems more likely than 103
IYR (Real Estate) New 2015 lows-not part of the Economic Modern Family, but still not a healthy sign
ITB (US Home Construction) Unless this gets back over 26.62, looks heavy
GLD (Gold Trust) Unconfirmed phase change to recovery
GDX (Gold Miners) 20.00 near term support. 17.00 the big support and over 21.30 a game changer for real
USO (US Oil Fund) Gapped higher and onto 2015 highs
TAN (Guggenheim Solar Energy) 45.00 the 50 DMA
TBT (Ultrashort Lehman 20+ Year Treasuries) 47.54 2015 high in TBTs until Tuesday-now its 47.61 with an inverted hammer doji candle
IFN (India Fund Inc.) After the potential bottom, it has an inside day just under the 200 DMA
EWI (Italy) 14.80 huge support
CORN (Corn) 2014 low 22.62. Tuesday low 22.86 then a bounce-maybe a bottom-needs more evidence
BAL (Cotton) Futures look good and even better over 68.00
SGG (Sugar) Cash back over $13.00 interesting
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 Negative 4, Intermediate-Term Negative 1, and Long-Term Positive 4, aggregate makes it a negative 1. No new longs for short-term trading for now 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:
PNRA 2 closes under the pivots with a move over todays high clearing R1 and the 10 DMA. Risk is 180.00 for a swing. Can do a 5 or 30 Min OR
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: SODA and DDD report before the open and are worth watching-especially SODA since never would have been stopped out
NFLX Gapped over the 10 DMA which is now the support-560 should hold if good miniswing if set ups with that risk. One note is it made new highs and closed on the lows-so reversal top also possible
AFL Confirmed phase change to bullish. An open over 63.81 clears the 10 DMA after this outperformed-5 or 30 minute OR. Risk today’s low for swing
Category 4:N/A
Phase Change: N/A
Reversal Trades: (Glass or Brick Wall Bottom or Top):
KORS Reports May 27th Inside day. Over 63.00 best, and has to hold around 62.00 now to stay a focus for mini to swing
Shorts:
Category 5: Titanic-Bear Phase, Negative pivots, not oversold, Risk R1 or previous day high. Target: Day to swing
MON 2 Inside days under the moving averages with a gap to fill at 114.97. So for now let’s say day to mini if cant clear 117
AAPL Unconfirmed phase change to warning. Risk 129 with target at 120 for first support. Can do a 5 minute OR or 30 minute OR-miniswing
QCOM Best risk 69.40 the 50 DMA with an ORR or 5 min OR best set up for a mini to swing since more weakness can take this down below the 200 weekly MA
Category 6: N/A
Best Best wishes for your trading,
Michele Schneider
