Looking at the daily average volume in the indices over the course of last week, it seems pretty safe to say that although there always will be pockets of specific sectors and/or instruments that defy the norm, overall, 2014, which began resembling the Chinese Zodiac animal spirit of the horse, galloping up to new highs, will conclude evoking the 2015 animal spirit of the sheep, quietly grazing on the hill.
Take last Friday. The volume in all the indices was halved or more than half of the daily average volume. Yet, in gold (GLD), Silver (SLV) and several othermining ETFs, the volume nearly doubled their daily average.
Moreover, the S&P 500, the Dow, and NASDAQ all had inside days (when the trading range of the day is inside the range of the day prior.) I find the low volume and inside day formations in these indices near or at 2014 highs positive. The Russell 2000, on the other hand, did not have an inside day, could not clear beyond what I considered an important area to end the week above (117.37), yet with the low volume did hold onto support at 116.50.
Equities such as Baker Hughes on the news about Halliburton and a possible business collaboration, Blackberry Ltd, had huge volume spikes-BHI traded up over 2%, BBRY down over 6% and Hertz HTZ, another one with mammoth volume, also traded down 5%. One might say that on a hillside of sheep, those 3 equities along with the metals were the wolves in sheep’s clothing.
Biotechnology ended the week the big loser with Biogen (BIIB) down over 3.8%. In last Thursday daily I wrote for Friday to “short a tired sector short-term such as Biotechnology.” In stark contrast and other than the metals glittering performance, Amazon and Tesla both had net percentage gains of 3.7 and 2.5% respectively.
Although rare for me to report on specific stock and ETF performances within the commentary part of this blog, I do so now because if you are an active investor looking to play til the end of year, finding the aberrant volume and price patterns will probably serve as your best compass.
It never troubles the wolf how many the sheep may be. Virgil
S&P 500 (SPY) Inside day near the highs. What could be so terrible? One note of caution is the Market Internals: Advanced/Decline, which has turned negative along with the McClellan Oscillator, and Up/Down Volume Ratio. Subscribers:Positive Pivots in SPY QQQ Negative DIA IWM
Russell 2000 (IWM) Held 116.50, which if breaks remains worrisome, 116.75 is pivotal, then 117.14 then 117.80
Dow (DIA) Inside day near the highs
Nasdaq (QQQ) New highs close with an inside day
XLF (Financials) 24.10 has to clear again. Otherwise, a break of 24.00 troublesome
KRE (Regional Banks) If 40.34 holds then will consider the end of last week a good correction
SMH (Semiconductors) Strong end to the week and now has to take out the last 3 weeks of consolidation to continue
IYT (Transportation) Lackluster but strong
IBB (Biotechnology) From last Friday’s daily, short a tired sector short-term such as Biotechnology. Now, 280 big underlying support.
XRT (Retail) Inside day IYR (Real Estate) Broke the 75.00 support and could have more downside
ITB (US Home Construction) Hovering at recent highs for 3 days in a row
GLD (Gold Trust) Explosive bullish engulfing pattern which might need a little digestion
USO (US Oil Fund) From last Friday’s daily, WHAT DO WE WANT? OIL! WHEN DO WE WANT IT? NOW! 2-day brick wall bottom if confirms over 29.00
OIH (Oil Services) Inside day
TBT (Ultrashort Lehman 20+ Year Treasuries) TLTs 120 pivotal area and the 50 DMA to hold 117.95
UUP (Dollar Bull) Ugly possible reversal-has to confirm
CORN (Corn) Subscribers: Inside day
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:
DG Nice 3 day down correction against the 10 DMA at 64.11 risk, Like ½ over 64.80 and the rest over 65.13 for a mini to swing
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 Over 28.01 is R1 and a good point to buy over with risk tight to 26.02 the 50 DMA swing
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)
KMP Huge volume follow through after 5 days down-now look for an ORR day to mini
KSU If missed this on a 5 minute OR then the 30 minute did nothing. Yet, the rest of the day it compressed which could mean over Friday’s high more upside for a day to mini
LNC Have to wait for this to clear 56.78-should hold 55.95 for miniswing
LEN 3 Inside days!!!In spite of our tail position, can look at an add on a day to mini over Friday’s high with risk to 45.35
AA Over 17.00 like for swing with risk 16.56
Category 4: N/A
Phase Change:
YOKU 22.67 is the 200 DMA to watch for a clearance. Then risk is to low of that day mini
XOM Inside day sitting on the 50 DMA Risk 93.83 with a move over 95.26 good for a new swing
GT Confirmed phase change to accumulation. If holds 25.37 look for an ORR or breakout and move to 30.00 possible for swing
BID Inside day on the 200 DMA. Has to clear 41.44 and hold 39.61 for swing
DDD Possible slingshot if confirms especially over 34.42 like with risk to 32.64 the low for a swing
Shorts:
Category 5: Titanic-Bear Phase, Negative pivots, not oversold, Risk R1 or previous day high. Target: Day to swing
MCHP If cannot clear 43.62 and breaks 42.54 could see downside if market is weak
Category 6: White Cap-Having a 2-3 Day correction over the pivots.. In a Negative Phase, Positive Pivots. Can sell an Opening Range High Failure if happens below R1 or previous day high whatever is higher and/or weakness if breaks S1 and prior day’s low
QCOM If cannot clear 71.19 and breaks S1, 70.53 looks like it will continue south
Best Best wishes for your trading,
Michele Schneider
