When we used to do a lot of sailing, before we moved to the high desert, we would look for white caps in the water as a sign to put on those life preservers and navigate for calmer seas.
Most investors have had life preservers on for some time now-especially those savvy enough to know that thehistoric diversion of the 4 indices coupled with the break from macro trading logic has kept the seas choppy all year.
Here we are again-a fairly significant drop in the market with S&P 500 and the Dow maintaining the 50 DMA (bullish phases), while NASDAQ retreats once again from the 50 DMA (warning phase) and the big news-no surprise to us-the small caps or Russell 2000s go into an unconfirmed distribution phase-breaking the 200 DMA.
I’m left with two thoughts here: First, will this break of the IWMs be anti-climactic following more in line with the sell when the market looks great and buy when the market looks lousy?
Second-The blow-off top possibility in the interest rates (TLTs) is still in play with a second inside day in a row. Is this when the rates depart more from the classic relationship with the overall market and will that ultimately be the market’s greatest gift?
S&P 500 (SPY) 186.45 bottom line low to hold Subscribers: Pivots Negative
Russell 2000 (IWM) 110.66 is the pivotal 200 DMA- we wait 2 days for confirmation of a phase change
Dow (DIA) 163.30 support
Nasdaq (QQQ) An inside day albeit an ugly unless it recovers from here
XLF (Financials) 21.50 a point to watch
SMH (Semiconductors) Outperformed-could this be a first sign my semis are coming back? 45.00 number to clear
IYT (Transportation) A winner holding the 50 DMA and outperforming the market
IBB (Biotechnology) Inside day
XRT (Retail) This is so important to the market and did not have a good day-no matter what-we need this group at the party
IYR (Real Estate) Inside day near the highs
XHB (Homebuilders) Think Exorcist
GLD It looks better except that it is sitting so close to a monthly moving average failure and where I believe the next money is-short
USO (US Oil Fund) Subscribers: I am interested in this group over 36.50
OIH (Oil Services) Sideways near the highs
XLE (Energy) New high
XOP (Oil and Gas Exploration) holding near the highs
TBT (Ultrashort Lehman 20+ Year Treasuries) 2 inside days
IFN (India Fund Inc.) Subscribers: holding on
EWP (Spain) Subscribers: New multi-year highs
CORN (Corn) Subscribers: 34.80 area should now hold
BAL (Cotton) Subscribers: Tested the 10 DMA
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:
HUN 25.50 point to clear to like this one again with support at the 10 DMA 24.99
ADP Inside day on the converging 10 and 50 DMAs-like if holds today’s low and clears todays high
CNX If today’s low holds, then like over today’s high and R1 since over the 50 DMA
XL 2 inside days. If 31.60 holds, over R1 lines up with today’s high-over the 80 monthly with a recent golden cross
Category 2: (Pipeline) N/A
Category 3: (Double Up)N/A
Category 4: (Rip Tide) N/A
Phase Change:
AON Over 86.00 clears recent congestion and then the risk to 84 makes sense
PM 84.80 is ultimate support and needs to clear 85.57
ONVO Brick wall bottom with today’s low max risk and over 6.25 more interesting
*TWTR Not recommending twitter but note the volume. Average volume is 14 million. Today’s volume was 134 million-that is at the very least worth a mention for a possible blow off-that is a rare case-textbook perhaps-also oversold
Shorts:
Category 5: Titanic-Bear Phase, Negative pivots, not oversold, Risk R1 or previous day high. Target: Day to swing
CERN sold off midday and now, looks more vulnerable provided it does not cross 51.00
TIF Under 87.47 looks weak to the 200 DMA at 84.50
DFS Under 55.98 looks weak maybe even to the 200 DMA at 53.45
Bye For Now!
