No jokes, no allegories, no metaphors. A market that climbs 300 plus in one single day is a tough act to follow! Statistically, Thursday’s session was the second time only since the first day of 2013 that the S&P 500 closed up over 2%! This is the type of rip your face off rally that comes when the crowd gets too short too fast. That double the average daily volume I noted from Tuesday and Wednesday in the S&P 500, was clearly a sign that the selloff was a blow off and most of the weaker longs had been shaken out (rightfully so.) But, it also indicated that getting short the market was not the best idea either. As we end this week with still no resolution to the government shutdown or a vote on the debt ceiling, it’s time to separate the technical signals from the news. If Thursday’s gap low holds, especially in the S&P 500 and it closes for a second day above the 50 DMA (as it is now back to an unconfirmed bullish phase), then the signs point to more upside for the upcoming week. In the sectors and groups, the Financial group as some big earnings coming up and would be well worth a follow if continue to firm. Conversely, if the market cannot hold and begins to rollover, I would look at Biotechnology as a place to see more fatigue after its huge run up and very hard fall from the highs.
S&P 500 (SPY) Subscribers: Positive pivots in all indices
Russell 2000 (IWM) A gap above Thursdays high is compelling but noted that it ran to resistance.
Dow (DIA) Confirmed reversal off the 200 DMA but running into resistance at the 50 DMA
Nasdaq (QQQ) Cleared the 50 DMA and has to confirm it can stay above it
ETFs:
XLF (Financials) Unconfirmed bullish phase. Subscribers: Like this if holds over the 50 DMA
SMH (Semiconductors) Still a fave longer term
XRT (Retail) Also has to confirm the bullish phase
IYT (Transportation) Another one attractive to follow if confirms over the 50 DMA
IBB (Biotechnology) If cannot clear the 50 DMA, then consider a short
GLD At the bottom of the range making these levels critical to hold or can see much lower prices in weeks to come
OIH (Oil Services)Another nice looking sector if everything holds
TBT (Ultrashort Lehman 20+ Year Treasuries) Interesting that TLTs tested and held the 50 DMA. Perhaps lower rates are in store for now
EWG (Germany) Subscribers: Still looking at higher levels and now a good low risk place to enter
FXI (China) Like to see 38.00 hold
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)N/A
Category 2: (Pipeline) N/A
Category 3: (Double Up) Positive Phase, Condition 1 through 4, Positive Pivots which means can either buy a 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)
CREE If today’s gap low holds, has more room to upside
CLH Now has to clear 60.00 and R1 but great ORR today against the 10 DMA
CIEN Inside day and also lots of room upside provided it holds today’s low
BBY Big volume day and with gap, has to hold the 10 DMA and today’s low. Has plenty of upside now that is newly over the 80 monthly moving average.
CERN As I have mentioned in the past, I am not the easiest buyer of new highs. But, this looks good with a reasonable risk to S1.
AAPL Over today’s high looks good and then it has to hold around 490.
HOG If holds today’s gap, then could play catch up tomorrow
LVS If holds the gap, next has to clear recent 2013 highs
TEX Of course this has to close over the 80 monthly moving average, and also clear 35.00 now especially on a closing basis
Category 4: (Rip Tide)N/A
Phase Change:
X Looks like the party is finally getting started. 21.60 are now support
SWI If this is real, look for a new buy opportunity against the 10 DMA and 35.00
RIO Really interesting chart with converging moving averages, nearly a golden cross and a phase change through all 3 averages. If today’s low holds, will look for entry
Shorts: Rather than write about picks, I am watching a few mainly in the biotech area that if break S1 could be good for a short (SRPT JAZZ)
Bye For Now
