Evening Watch List for November 6th

Mish Schneider | November 5, 2015

How Charts Are A Trader’s Canvas

de Kooning, one of the most influential artists of the 20th century, believed in order to start from scratch, one must first work through the accumulated influences and then deconstruct those influences.

In market terms, active investors begin each day starting from scratch. However, the decision to buy or sell relates directly to the accumulated influences of the charts. Charts are a trader’s artistic representation of what came before.

How those influences or past price movements get deconstructed very much depends on the “vision” or bias of each individual trader.

Currently, traders are trying to deconstruct a myriad of influences. Some of those influences include: the strength of the dollar, future of US and European interest rates, economic data, earnings plus a glaring division between the good, the bad and the ugly.

Personally, my canvas typically begins with how the Economic Modern Family is doing. As primarily a position swing trader who likes to dabble in day and miniswing trades, I assess my one key index (IWM) and 5 sectors and groups (KRE IBB SMH XRT IYT), then make trading decisions.

Or indecisions.

Other factors that go into my trading decisions are phase, risk/reward, etc. However, the canvas for my swing trades begins with deconstructing the Economic Modern Family-my biggest influence. I assume that how the Family is doing takes into account the myriad of other influences described above.

de Kooning believed that art was a “big bowl of soup” and that “everything is in there already.”

I believe the same is true with charts. What we pull out from the soup bowl is our assessment of everything that preceded current price action.

The Russell 2000s are sitting right within the zone of what I’m calling the “trifecta of resistance.” Regional Banks are close to the 2015 highs. Retail is holding in a strengthening Recovery Phase.

Transportation continues to play out as indecisive follower rather than leader, maintaining sideways consolidation. Biotechnology could push higher if the others do, but right now, it looks vulnerable.

Semiconductors fell hard Thursday, closing back under the 200 DMA.

Deconstructing the Family, many speculators remain sidelined. Semis and Biotechs are where speculative money tends to go. However, money is accumulating in the other areas.

The charts on the Financials and Small Cap stocks look promising.

If tomorrow you are starting from scratch, look at where we are now with the thought that it is because of where we just came from.

The market tested lower levels and rejected them. Possible same could happen with the higher levels as well. If you’re canvas becomes too “abstract” keep a minimalist approach to trading.

Otherwise, note the sectors breaking out, follow the money, decide the risk and paint away!

S&P 500 (SPY) 210 remains pivotal with 213 the big area to clear Subscribers: Negative Pivots in all

Russell 2000 (IWM) The September 17th spike high, the 65 week moving average and the 100 daily moving average, all converge around 118.50-119.00.

Dow (DIA) 177.40 near term support with 180 the big point to clear

Nasdaq (QQQ) With some digestion, 114.39 the old high, an important level to hold on a weekly basis

Volatility Index (VIX) Fear subsided

XLF (Financials) Needs to clear 24.55

KRE (Regional Banks) 45.62 the 2015 high. 43.60 level to hold

SMH (Semiconductors) Closed under the 200 DMA making 54.22 pivotal

IBB (Biotechnology) 327 important level of support

XRT (Retail) Looks better with the September 17th high to clear 47.68

IYR (Real Estate) Holding the 200 DMA at 75.75 Through 77.04 like it for an active trade

ITB (US Home Construction) Has spent 5 weeks trading around converging moving averages-big move one way or another coming

GLD (Gold Trust) Will this be a case of “It’s been down so long it looks like up to me?”

SLV (Silver) A doji day on a valid trendline

GDX (Gold Miners) 14.00 key to hold

USO (US Oil Fund) Range bound

XLE (Energy) 68.50 level a good risk point to hold

UNG (US NatGas Fund) Bottom could be in place

TAN (Guggenheim Solar Energy) Want to see a weekly close over 31.00

FXI (China Large Cap Fund) Sitting under the 100 DMA

BAL (Cotton) Subscribers: This is still trying to bottom

SGG (Sugar) Island top confirms with lots of support underneath

JO (Coffee) Subscribers: Through 19.80 should be good to go

***Market Tone: Short-term Negative 2, Intermediate-Term Negative 3, Long-Term Positive 3

NOTE: *All starred picks are from the automated list of picks (which now includes short picks!) denote that it has one or more of the 18 chart patterns we have used on the radar screen. For example, inside day, 2 days under floor trader pivots, phase change, brick wall or return to the 10 DMA, etc.

Tap here to view the September Live Coaching recording:
"How To Vet the Evening Watch Picks"

Longs:

ADSK**
AMZN
BYD
CB**
CIEN**
COST**
CTRP
CTXS
DLR**
EA
EW**
FB
FBHS**
FRAN**
GD**
GE
GGP
GME
HLF
INCY
IPG
JBLU**
JNPR
LAMR**
LEA**
LGF**
MAC**
MGM**
MYGN**
NFX
PSX**
REGN**
RHP**
SBUX
SNDK
SYNA
TTWO
UAL
ULTA**
V
VRTX
WNR
YOKU