The sheep are in the meadow, fat and happy. The wolf salivates. After posting the tightest 5-day trading range in SPY since 1968, Tuesday’s session brought back some fond memories of 2013, aka “Turnaround Tuesday.” It did so on light volume.
The Russell 2000s helped considerably by not breaking down further making new November lows. Yet, nor could they quite clear the healthiest of resistance points, 116.75 or even 116.50 by day’s end. Doesn’t mean they can’t, just means they haven’t.
As we have witnessed since late last week, the pockets of excitement that the market is now serving up for active traders ensued. Solar energy, particularly Sun Edison (SUNE) soared rising nearly 29%!
Although other sectors scored well (Biotechnology, Gold Miners, Healthcare), clearly Solar (mentioned Monday night here, “We are very much attentive tosolar energy and 3-D printing. All could be basing after doing very little throughout 2014. Those sectors just might hold the Ram’s head position as this year concludes and 2015 begins,” delivered with unbelievable abundance and ahead of schedule. Perhaps the final equestrian feat from our soon to be old friend the horse is the proverbial message, “Don’t look a gift one in the mouth!”
So, if the sheep are grazing in the meadow, the horses are bearing gifts, where are the wolves hiding?
Looking at the Market Internals: Advanced/Decline, Up/Down Volume Ratio and the McClellan Oscillator, which had all turned negative, Tuesday went to neutral meaning they remain technically in a sell signal, just not as clean. Like a hungry wolf shrewdly plotting out how to present as a sheep, these internals heed consideration.
Therefore, we continue to take profits and trail up stops on our existing positions. Moreover, execute new trades using much shorter timeframes (day to miniswing) on new longs and hedge with short setups.
S&P 500 (SPY) I remember mentioning 220 target months back. Maybe. For now, 203.50 has to hold Subscribers: Positive Pivots in all
Russell 2000 (IWM) 115.28 the November low to defend
Dow (DIA) Starting to look toppy
Nasdaq (QQQ) Remember the runaway gap from October 31st? Never filled and still working.
XLF (Financials) Closed over 24.10-now has to stick above it
KRE (Regional Banks) Inside day
SMH (Semiconductors) Closed on new highs
IYT (Transportation) Maybe toppy, maybe resting
IBB (Biotechnology) Good day but the topping candle from 10/31 remains above
XRT (Retail) Mediocre day
IYR (Real Estate) Back over 75.00-a reliable swing area
ITB (US Home Construction) Hovering at recent highs for 5 days in a row-merits close eyes
GLD (Gold Trust) Narrow range getting close to the 50 DMA
GDX (Gold Miners) Pushing up against the 50 DMA
USO (US Oil Fund) 2 Inside days reconciled to downside-that is another potential wolf in sheep’s clothing
XLE (Energy) Not impressed
UNG (US NatGas Fund) Doji day and still very interesting to see if can clear 23.35
TAN (Guggenheim Solar Energy) Subscribers: 35.76 now needs to hold
TBT (Ultrashort Lehman 20+ Year Treasuries) TLTs 120 pivotal area and the 50 DMA to hold 118.10 (notice the slope is moving up?)
UUP (Dollar Bull) Back to looking toppy potentially
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:
LEN If holds 44.80 like over 46.00 for an add to our long daytrade
RAX 40.50 best risk for a possible miniswing to swing trade if clears 43.80 then 43.27
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)
XRX An ORR could work against 13.38
ALK Improved in condition-Alaska could be a good destination with the legalization of marijuana-. This has to hold 55.50 for an ORR or breakout over 56.82 day to miniswing
MPC Like if holds 93.05 and clears 94.78 for day to miniswing
AA An ORR best to control risk
Category 4:N/A
Phase Change:
FNSR Reports December 4th 16.71 max risk (some options buying lately) and over 17.23 clears resistance for swing
GT Unconfirmed phase change back to Accumulation. Has to clear 26.00 hold today’s low
CYH Look for an ORR against 48.26 the 10 DMA
AMZN Tried but not clear 328.45 the 200 DMA-if does not, good risk to today’s low
DDD ½ position which we will add to on an ORR against 35.10 or a breakout over today’s high
HSY Over 97.00 clears the 200 DMA with risk to the day’s low if does it
GLPI Like if holds 31.82 and better over 32.32
Shorts:
Category 5: Titanic-Bear Phase, Negative pivots, not oversold, Risk R1 or previous day high. Target: Day to swing
X Inside day with resistance at 36.33 if breaks today’s low also breaks S1 and could see lower for a day to mini
Category 6: N/A
Best Best wishes for your trading,
Michele Schneider
