The Russell 2000s completed its 8th day consolidating in a tight range on low volume leading many traders (myself included) to ponder what this tight trading range with obvious lack of volatility means going forward.
Seven theories come to mind:
1. Time, not price as a legitimate way to work off overbought conditions.
2. Although bullish sentiment has increased, the euphoria has waned and many players remain sidelined. This supports my favorite volume signal we have yet to see-a blow off top scenario.
3. A Federal Holiday and little in the way of fresh economic data to start this week-folks are waiting.
4. The scare tactics from permabears, Doomsday Sayers coupled with traders who aren’t long enough rationalizing this more as a false rally, all have been collectively successful in keeping new money out of the market.
5. The early start of a general lack of fresh participation ahead of the holidays. Hey, if stores can advertise earlier and earlier, investors can even up earlier as well.
6. A confusing and real lack of leadership in the high momentum stocks along with an anemic advanced/declined indicator, not to mention concerns on a market running rich.
7. Falling oil, gas and metals prices leading to fears of deflation. (Actually, all look better with possible bottoming formations developing).
And perhaps the best reason of all- Analysts like me have too much time to put way too much thought into this. It could all mean absolutely nothing except, new rules during a year when a whole bunch of new rules emerged. Take the market at face value.
Note: If you want to totally blow your mind, google the number 7. From mathematical to classical to food, media, games, literature, music, sports, places and religions, not to mention the Seven Theories of Catastrophe (math and science), the number 7 is all that!
S&P 500 (SPY) Oxygen tanks anyone? Subscribers: Positive Pivots in all
Russell 2000 (IWM) Over 117.80 brings it to the Promised Land and has to hold 115.80
Dow (DIA) Overbought but no topping patterns yet
Nasdaq (QQQ) With the help of AAPL and a few others-BIDU, LNKD, this finally made new highs
XLF (Financials) New high and some slight possibility of a reversal candle-of course, needs confirmation
KRE (Regional Banks) Inside day-40.43 pivotal
SMH (Semiconductors) Semis are not needed at this party, but, still like to see them clear 52.00
IBB (Biotechnology) Good day if holds 293.50 level
XRT (Retail) 2 inside days-sweet place to look for follow through
IYR (Real Estate) 75.00 big support
ITB (US Home Construction) Wrote about this so hope you all jumped in-now a bit of resistance
GLD (Gold Trust) Won’t say reversal, but will say possible over 113.15-espeically if gaps above
USO (US Oil Fund) 30.00 key point to clear if going to hold
XLE (Energy) 86.25 key support with 88.90 the 50 DMA to clear
XOP (Oil and Gas Exploration) Over 62.00 different picture
FCG (First Trust ISE Reserve NatGas) Over 16.00 much better
TAN (Guggenheim Solar Energy) Subscribers: I will not take my eyes off of this for sure
TBT (Ultrashort Lehman 20+ Year Treasuries) TLTs 120 pivotal area and the 50 DMA to hold 117.75
FXI (China Large Cap Fund) Subscribers: Could be a good place to start looking again-inside day
SGG (Sugar) Subscribers: Big move up to the 50 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:
BBY Reports November 20th. Inside day good risk for a day to miniswing if holds 34.10
Category 2: (Pipeline) Positive Phase, Condition 2-3, 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:
CENX Inside day max risk 26.70 with over 27.69 R1 a good mini to swing risk
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)
TSO 70.86 new risk point with lots of upside if this continues through 73.60
TASR 20.25 is our target with a stop probably now at no loss or under S1
AAPL Great close-look for an ORR or breakout over 110.30 for a day to miniswing trade
PAY 2 Inside days. 36.50 max risk and has to clear 37.33 for swing
ABBV-over 64 good day to mini
LNKD If clears 232.30 like for a mini with risk to 226-227 target around 255
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:
XPO Oversold on the 2 day RSI. Max risk 37.11. Like better over 38.53 R1.
Phase Change:
IGT Cleared the 50 DMA-look for an ORR against 16.63
OC Inside day with 32.33 the far risk and 32.89 the closer risk
TEX Keep an eye on this over 30.00 with risk to 28.85
Shorts:
Category 5: Titanic-Bear Phase, Negative pivots, not oversold, Risk R1 or previous day high. Target: Day to swing
NFLX At some point this will go down I believe. 378.13 breaks S1
CBS Looks like a bear flag forming. If breaks 51.50 like for day to miniswing with risk 52.23
FB Probed but got out since closed above 74.60-now 75.00 max risk with a break of 74.00 even better
Category 6: N/A
Best Best wishes for your trading,
Michele Schneider
