What began as merely a great metaphor involving the Chinese New Year of the Sheep, became more solidly relevant through the first 3 months this year (even at the risk of sounding repetitive), and presently has me bowing my head to its amazing accuracy securing my faith that the 2015 trading range is alive and well.
I wrote Wednesday night, “In the spirit of our sheep pasture or trading range, these key levels that held up Wednesday in the S&P 500, NASDAQ, Russell 2000s, Regional Banks, Biotechnology and Transportation, could stymie the bear dance if they continue to hold up as the market heads into yet another of most-important-jobs-report-ever number on Friday.”
After the precipitous drop in the TLTs (20 Year Treasury Long Bonds), no surprise that as oversold as it was coming into Thursday, it would bounce. And so it did.
That tells me that the market, although under some pressure while the rates firmed, still never came close to selling off proportionately to the idea and recent sell off of the Long Bonds.
That’s not to say I am bullish since that would imply I expect new highs. Nor can I get too bearish either since I purposely selected 6 instruments (my Economic Modern Family) to watch for a fair macro picture, and have observed over and over again how when the darkest days occur, at least one of those instruments perks up and ultimately carries the others out of the abyss.
Thursday, if we look strictly at percentage gain, that honor went toTransportation (IYT). Biotechnology, Retail (Granny, actually neck in neck) and Semiconductors certainly carried some weight and all outperformed the indices, nevertheless Trannies, not only had the biggest gain, but also cleared back over the 200 DMA closing just shy of it.
If you want to look at what I consider the best gauge going into tomorrow, let’s stick with Trannies. If they (IYT) convincingly clear 156.40, the 200 DMA, believe it. Conversely, if they break 155.50, believe it.
The other 5 will have my attention of course-Russell 2000s, Retail, RegionalBanks, Semiconductors, and Biotechnology. All are in Warning Phases already with the exception of KRE, still in a bullish phase. However, if KREbreaks Thursday’s low, that will change quickly back to warning.
Henceforth, since it’s Trannies that have broken down the most, it stands to reason that they in turn need to hold here the most. If not, March lows and perhaps even lower to January lows becomes much more probable.
S&P 500 (SPY) 207 key support to hold and over 210 clears the outside day high after it had an inside day on Thursday Subscribers: Positive Pivots in all
Russell 2000 (IWM) March lows 119.83 while over 122 impressive
Dow (DIA) An inside day like SPY. Therefore, good range to watch 180.25 to 177.25
Nasdaq (QQQ) Inside day here as well. Over 108 believe, under 105.50 also believe
XLF (Financials) Back to Bullish, after the see-saw of Warning, Bullish, Warning, Bullish, Warning, Bullish-forget the 50 DMA here-it’s the 200 DMA that has to hold or not
KRE (Regional Banks) 40.00 to 41.50 a range to break
SMH (Semiconductors) 56.25 good point to clear and 55.35 the point to hold
IYT (Transportation) 152 support and unless it gets back over 156.40, should see that support tested
IBB (Biotechnology) 332.60 support with a move over 350, much healthier
XRT (Retail) Held where it needed to making Thursday’s low important support. 99.62 the 50 DMA overhead
IYR (Real Estate) A bounce following the rate relief
ITB (US Home Construction) A 2-day bottom in place. Over 26.65 clears the 100 DMA
GLD (Gold Trust) That negative slope in the 50 DMA has prevented us from even looking at trading this right now
USO (US Oil Fund) Expected the sell-off after the topping candle Wednesday. 18.47 huge underlying support
XOP (Oil and Gas Exploration) First one in the group to visit the 50 DMA
TAN (Guggenheim Solar Energy) A fave for Friday now that it tested the 50 DMA and held it
TBT (Ultrashort Lehman 20+ Year Treasuries) Moved right up to the 200 DMA resistance on Wednesday, then retreated from it on Thursday.
EEM (Emerging Markets) Good place for this to hold and resume upward move
EWI (Italy) 14.80 huge support and over 15.40 like it
SGG (Sugar) Cash back over $13.00 interesting
PHO (Water) Could be departing from the overall market relationship if continues to hold 25.00 and clears 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 Negative 1, Intermediate-Term Positive 1, andLong-Term Positive 6, aggregate makes it a positive 6. We can look for some mini to swing longs that are holding up better. 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:
NFLX 2 days under pivots but closed just above them not clearing R1. Like a risk no more than 553 and R1 is at 568.50. Depending on where it opens Day to Swing
JPM 2 days under pivots but closed just above them not clearing R1. Miniswing risk max and can do an ORR over 63.57 or over R1 on a 5 or 30 minute 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)
EXPE To control risk would look at an ORR against the 100 level for a day to mini max
PNRA Consolidating and over 185 should take it up. Has to hold 180 making this a swing only. ORR works best in this instrument
AFL Inside day. Like the risk to under today’s low and S1 for a miniswing. Has to clear 64.30 to take out the trendline.
Category 4: N/A
Phase Change:
SCTY: Inside day. The real risk is over 2 ATRs for swing so have to do this as a miniswing on an ORR against 60.43 or a daytrade to mini over R1 61.50 on a 5 or 30 minute OR
Reversal Trades: (Glass or Brick Wall Bottom or Top):
Shorts: Waiting on new setups
Category 5: N/A
Category 6: N/A
Best Best wishes for your trading,
Michele Schneider
