In the play, “The Seven Year Itch,” a nerdy, faithful, middle-aged man with an overactive imagination experiencing a mid-life crisis, meets a sexy woman while his wife and child are away. Overcome by fantasies, he imagines himself irresistible to this woman. She in turn, tells him that he is like, “The Creature from the Black Lagoon.” He eventually comes to his senses, fearing his wife’s retribution.
In 2007 the market peaked at then new highs, tumbling dramatically down thereafter, 7500 points in the Dow, until bottoming out in 2009. Then, the market clawed its way back. After the US downgrade in 2011, the market had one quick drop in a moment of reality only to go back into a state of fantasy, where it remained until September 2014-or what we can now call the 7 year itch.
I could go on and on making analogies, but for brevity sake, suffice to say thatin spite of the great attempts to rally intraday, the selling comes in with a vengeance. If this is the market’s mid-life crisis and it’s finally getting a grip on the reality of slow global growth, geopolitical discord and a huge disconnect between the earners and the rest of the US, we could still have what appears to now be delusions of grandeur (times when we do rally or when the sexy woman shows up).
A 50% move (or mid-life) from here brings the Dow down to around 12,000. Overall, except for pockets and/or individual instruments that will always find their own way, the cycles of phases in deterioration should continue to play themselves out.
S&P 500 (SPY) Green close good volume. Now, we need follow through-a move over 189.37 a start with 190.62 the fantasy land of the 200 DMA Subscribers:Negative Pivots in all but IWM
Russell 2000 (IWM) Good news is that we are hovering around the monthly moving average, one we have not closed below since 2011. The bad news is we are hovering around the monthly moving average, one we have not closed below since 2011.
Dow (DIA) Green close, really good volume so that’s not bad. But, has to get over 163.13 and stay there with its 200 DMA 165.67
Nasdaq (QQQ) Marginal green close good volume. Holding the 200 DMA and way below the August low now super important pivotal level 93.89
XLF (Financials) Inside day on the 200 DMA-has to move up and out over 22.60 or trouble for everyone
SMH (Semiconductors) 46.69 the 200 DMA and if good, has to clear or Tuesdays action was nothing more than a sell opportunity
IYT (Transportation) Unconfirmed phase change back over the 200 DMA-like to see that stick
IBB (Biotechnology) I like that is oversold near the 200 DMA which means it has a chance to recapture a move to 267
XRT (Retail) Until this proves something, I find a weak retail sector troublesome
IYR (Real Estate) Tested then retreated from the 50 DMA
GLD 117.80 support with a doji day
USO (US Oil Fund) When you have 2 doji days, typically it means a bigger move is coming-this one reconciled to the downside
TAN (Guggenheim Solar Energy) Subscribers: Held the 23 monthly moving average today. If clears 34.64 tomorrow, will go in for a swing
TBT (Ultrashort Lehman 20+ Year Treasuries) TLTs –any surprise?
UUP (Dollar Bull) Watch 22.90-if that clears back in business
EWW (Mexico) Subscribers: Inside day and under the 200 DMA-not a bad short under 65.90 risk to 66.45
CORN (Corn) Subscribers: Unconfirmed phase change to recovery
BAL (Cotton) Subscribers: Didn’t confirm the recovery phase
SGG (Sugar) Subscribers: Like this against 42.80
JO (Coffee) Subscribers: Consolidating near 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:
MYGN Wild but looks good over 39.02 if you can stand the swings-37.20 should hold
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)
JWN We have a small miniswing position which could turn to swing if this clears R1 70.32 Has to hold 69.50 tightest risk
C Reported. Now if holds around 51.20 confirms phase change back to bullish-most likely look at a miniswing risk
Category 4: N/A
Phase Change:
RDN Converging moving averages and phase change. Like over 14.58 risk 14.26
GT Big call buying inside day and possible slingshot if clears and holds over 20.26
GLPI Reports 10/28. Like this action over the 10 DMA. If holds around 30.40 could see move to 32.40 next
KSS Watch for an ORR against the 200 DMA
WFM Reports November 5th. We are long against July lows. Now, with an inside day, looks good over 37.50
DDD Reports 10/28/14. If holds todays low could see move especially if clears 42.20
TS Possible blow off with over 3 times the average volume. It’s here because the 80 monthly moving average is at 40.13-good if can cross it
Shorts: Focus List: SYK EWW
Category 5: Titanic-Bear Phase, Negative pivots, not oversold, Risk R1 or previous day high. Target: Day to swing
D Huge drop below the 200 DMA. Now 69.20 resistance with more room downside to 66.00 or lower
ALXN Unconfirmed phase change to distribution with lots of room on the downside-164 resistance
BBBY confirmed phase change to Bearish. If cannot clear 64.60 has room to 63.00 or lower
RHT Distribution phase confirmed- could see 53.00 next
NSC Reports 10/22 Inside day-max risk today’s high
INFA Reports 10/23 Never broke the OR low again which means if does tomorrow, can see a move to 31.00 or lower
Category 6: N/A
Best Best wishes for your trading,
Michele Schneider
