Monday brought an unconfirmed warning phase to the S&P 500 with a distribution day in volume and a confirmed warning phase to the Dow. NASDAQ closed basically unchanged while the small caps closed higher with an accumulation in volume. Biggest loser percentagewise-Real Estate Sector ETF. Biggest gainer-XHB Homebuilders. Second to that-Semiconductors. The talk of an island top has been silenced-gaps filled. Our portfolio shows more than a 27% gain since June 2013 but with the least number of positions on currently since before my vacation in August. We are light and ready to move to whatever tune the market has in store as October hits-from the waltz to break dancing. Please read below on thoughts as the best dance partners.
S&P 500 (SPY) Watch the 50 DMA-the unconfirmed warning phase is just that unconfirmed and weak at that. Subscribers: Negative pivots in all indices
Russell 2000 (IWM) Closed just shy of the 10 DMA which means over Mondays highs-should probably close your eyes and follow the leader
Dow (DIA) First has to clear 151.76 then the 50 DMA so definitely has its work cut out for it
Nasdaq (QQQ) Closed just shy of the 10 DMA which means over Mondays highs-should probably close your eyes and follow this leader as well
ETFs:
XLF (Financials) Clearly a wallflower here and probably needs to stay that way for now
SMH (Semiconductors) No more breakaway gap. Let’s see if this can clear 40.20
XRT (Retail) Another viable dance partner over today’s highs
IYT (Transportation) Went right to the 50 DMA and bounced-not seeing a clear path just yet
IBB (Biotechnology) Has to clear the recent highs
IYR (Real Estate) Certainly not a good dance partner just yet
GLD To me, today’s action is negative. Unless it clears 129, looking like it can drop back down to July levels
USO (US Oil Fund)Landed right on the 200 weekly moving average-which if holds todays’ low could mean a pop from here.
XOP (Oil and Gas Exploration) Another potential dance partner over today’s highs
VXX Subscribers: only 1/3 position left now to play out
EWG (Germany) Subscribers: Over 27.90 should continue after the runaway gap from 9/16
FXI (China) Subscribers: Unconfirmed phase change to recovery unless the 200 DMA and today’s high clears
SGG (Sugar) Subscribers: One more push gets this over the 200 DMA
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:
BYD Held the 10 DMA making the max risk today’s low and has to clear 14.32 R1. Cleared the 80 monthly first time since 2008
Category 2: (Pipeline) Positive Phase, Condition 2-3, 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:
COF Like over todays’ high especially if it gaps over it.
P inside day and over today’s high also clears the 10 DMA and R1 with risk to 24.67
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)
TRIP 73.50 is the 50 DMA and really very sideways action-will not hesitate to get back in on strength
ALXN Inside day and slightly negative pivots. Like over 116.91 and has to hold todays lows
GPOR Like an ORR now against 63.50 to control risk
Category 4: (Rip Tide) Oversold (2 or more days under FTP), Condition 4, Needs to clear R1, Risk previous day low unless noted differently, Target- Day to at least 3 ATRs from entry:
APA Now really oversold with max risk 84.15 and like over today’s high
Phase Change:
EBAY 2-day correction with today’s low good risk and over todays high looks good
FOSL Will look at it again over 116.77 or R1 with risk to S1
JPM Inside day. Has to clear 52.40 and hold 51.39 the original stop
BEAM Bullish engulfing pattern-has to hold 63.95 and over 65 clears 3 days of resistance
X Took home ½ position to see if can hold the 200 DMA but really, want to see 20.40 hold now
Shorts: Going to look at GLD for a short
Bye For Now
