“There is something in October sets the gypsy blood astir: We must rise and follow her, When from every hill of flame She calls, and calls each vagabond by name.”
William Bliss
This October will go down in the annals of finance history as one where all traders became vagabonds, rising and following the flame of the gypsy market.The market dropped 10% from its peak high in the S&P 500 at 201.90 posted September 19th, only to bottom on October 15th with ginormous volume,then proceeded to roar back 10% by month’s end, missing the September high by 8 ticks. The Dow Jones Industrial Average closed on new highs as did the ETF DIA.
This October the Federal Reserve said goodbye to Quantitative Easing, The San Francisco Giants squeaked a World Series victory, Ebola struck fear in the hearts of Americans, AAPL released the iPhone 6, Tim Cook came out of the closet, and George Clooney got married.
November should begin as sweetly as October ended. No signs of danger as of last Friday’s close-no blow off volume or strong reversal patterns in any of the indices. In fact, we have a possible runaway gap in NASDAQ. The rotation to the Financial sector went well, Oil and Gas although near lows, could form bottoming patterns, while Gold and Silver made shopping for jewelry more affordable, (that and a strong US Dollar.)
Americans are making and spending less, but we feel wealthier with strong consumer confidence. This week brings midterm elections-the results could be a market mover-will be a matter of expectations met or not, followed by perception.
For now, stay the course, especially with many more earning reports due out this and next week. However, keep eyes peeled for signs of a top-islands, blow off volume, reversal patterns, etc. At the same time, look out for the next rotation, both long and short (Homebuilders did little to wow last week.)
"Autumn is marching on: even the scarecrows are wearing dead leaves."
Otsuyu Nakagawa
S&P 500 (SPY) 201.90 the old high which could be left in the dust with a strong Monday open. Otherwise, a gap lower will definitely make newer, weaker longs nervous Subscribers: Positive Pivots in all
Russell 2000 (IWM) September peak high 117.80, Friday’s high 116.96-therefore, an extremely important piece of the puzzle. Has to continue running or another early warning sign if cannot
Dow (DIA) New high close
Nasdaq (QQQ) Friday’s low 101.07 now the place to hold to support the theory or a possible runaway gap
XLF (Financials) Interesting September high 23.88 Friday’s high 23.87-cool
KRE (Regional Banks) Overbought and could not match September high-good to note these levels
SMH (Semiconductors) Great comeback. Back to unconfirmed bullish phase if holds 50.15
IYT (Transportation) Definitely a place to look for more upside
IBB (Biotechnology) New highs
XRT (Retail) Strong market and this will have more to go
IYR (Real Estate) New high close!
ITB (US Home Construction) Should have done better so for now, making this a number place to look for shorts should the market turn over
GLD (Gold Trust) Way oversold!
Metals and Mining (XME) Relative to gold this looks like a bottom forming
USO (US Oil Fund) Triple bottom possible if clears 31.00 like it for a pop
XLE (Energy) The death cross above is a bit scary, but look at the weekly charts. They look better
XOP (Oil and Gas Exploration) Love the weekly chart here as it closed back above the 200 weekly moving average
TBT (Ultrashort Lehman 20+ Year Treasuries) TLTs 120 pivotal unless this begins to break further below 117.50
UUP (Dollar Bull) New multi-year highs
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 42.50 max risk good for swing if clears 43.84 R1
X Looked at Friday for the buy but we want to see it hold 39.00 Monday and stay above 40.10-swing
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)
AKRX Didn’t do much on Friday but really well situated now for new highs but reports 11/6 so have to be a day to miniswing trade
EXPE Although it had an ORR Friday, it was Friday and slow. Now, if holds Friday’s low has room to the September highs and beyond for a swing
Category 4:N/A
Phase Change:
JBLU Inside day over the 50 DMA-if clears 11.81 then could look like an inverted head and shoulders bottom with risk to Friday’s low
XRX Unconfirmed phase change to bullish. Has to hold Friday’s low and then really clear 13.64 the high of the day it collapsed post earnings
YUM Unconfirmed phase change to recovery. Has to hold Friday’s low and can look at an ORR best to control risk
HCA Lots of call buying on Friday but didn’t do much after its initial pop. Like the position under the 10 dma 70.78 which has to clear then the risk will be to Friday’s low for a swing
OC We are back looking for that 50 DMA and beyond. But will do a quicker time exit if cannot hold 31.10
YOKU Reports 11/13. Like this still if holds 19.20 on a reversal or breakout
HPQ Reports 11/25 Unconfirmed phase change to bullish with 35.00 good risk area and has to clear 36.00
Shorts:
Category 5: Titanic-Bear Phase, Negative pivots, not oversold, Risk R1 or previous day high. Target: Day to swing
TOL 32.59 is the 50 DMA that should not clear with under S1 31.54 good for day to mini
Category 6: N/A
Best Best wishes for your trading,
Michele Schneider
