We’re not advocating keeping your head in the sand-historically, the last two weeks in October have been bearish. But, if the small caps and/or Russell 2000s and NASDAQ hold Friday’s lows, we have a breakaway gap in the works. Remember last week I wrote that the next fear mongering most likely to come out will concern the Federal Reserve tapering on Quantitative Easing. I don’t think a crystal ball was necessary on that one. Indeed, talk did begin to circulate, which is why in the last hour of Friday’s trading session, the rates firmed off their lows, leaving a possible reversal candle in the ultrashort ETF TBTs. I point this out because as we head into Monday, I will be watching for two different and opposite confirmations-either the breakaway gaps hold and all’s good in the hood; or, the rates climb and TBTs take out Friday’s highs and keep going. Then, we watch interest rate sensitive groups such as Real Estate, Homebuilders, and Gold, to name a few begin to falter from their recovery and accumulation phases back to more negative ones. That would suggest to me, a possible dominoes effect, at least temporarily. However, let’s end on a bright note-lots of new highs were made in many other groups-Semiconductors, Oil and Gas Services, Exploration, Financials, Transportation, Energy and Retail.
S&P 500 (SPY) We have had 3 accumulation days of volume on this up move over the last couple of weeks. We did make new highs on Friday. All of this makes Friday low important. Subscribers: Positive pivots
Russell 2000 (IWM) New highs and still no blow out type volume so should be good unless some dramatic action happens like a big gap lower. Throw that salt over your shoulder!
Dow (DIA) Laggard-and for good reasons-IBM! The last big rally that peaked in September, this was the first one to falter. So, keep eyes here
Nasdaq (QQQ) Google-I salute you!
XLF (Financials) 20.93 was the 2013 highs to clear-got to 20.96 before closing at 20.91
SMH (Semiconductors) A breakaway gap in the works here too
XRT (Retail) New 2013 highs
IYT (Transportation) New 2013 highs
IBB (Biotechnology) Closed down 1%. Seems tired overall.
IYR (Real Estate) Touched the 200 DMA and retreated. Existing home sales reporting Monday. Big eyes here as well
XHB (Homebuilders) Really needs to hold Friday’s low.
XOP (Oil and Gas Exploration) XOP is the new IBB!
TBT (Ultrashort Lehman 20+ Year Treasuries) Subscribers: Possible slingshot pattern if confirms-which would mean a move over 74.07 or R1.
EWG (Germany) New highs
FXI (China) Like 38.00 as support to 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
**NOTE: New and Old Subscribers: I do not include on the list 1. Anything with a weekly or daily RSI over 92 2. Anything within 4 days of reporting earnings 3. Anything with a risk over 1 ATR from its current close 4. Anything with only one day under the Floor Trader Pivots (unless specifically noted. 5. Anything with a potential slingshot or brick wall high (new 60 day high, close in the bottom 25% of the intraday range.
**NOTE: With this extended move, not surprising to have slim pickins for Monday. Need to be patient for new setups.
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:
ATI Reports October 23rd before the market so DAYTRADE only. I put this here however, because it has 3 days under pivots, improved in phase and condition and has a great risk to 30.94.
Category 2: (Pipeline)N/A
Category 3: (Double Up) Positive Phase, Condition 1 through 4, Positive Pivots which means can eitherbuy 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)
GPOR Reports November 4th. Improved in condition. Would use a tight risk to Friday low, and has room over recent thighs to make another leg up.
CTSH Reports November 7th. Inside day over the 10 DMA and like the risk to Friday’s low. Could see recent highs first, but has potential for higher
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:
TEX Reports October 23rd. Kept small position and now as a daytrade only-could see another move up if holds 33.50
Phase Change:
K Reports November 4th. Over the 50 DMA. Now, Friday low has to to hold to see a move to the 200 DMA.
DOV Unconfirmed phase change to bullish. If holds Friday low, then could be ready to resume move to 92.50-93.00
WU Like the phase change but only interested if has an opening range reversal against the 50 DMA. Like that it is over the 80 monthly moving average
Shorts:
Category 5: Titanic-Bear Phase, Negative pivots, not oversold, Risk R1 or previous day high. Target: Day to swing
CI Reports October 31st. Opening Range High Failure preferred as it looks poised to visit the 200 DMA. Risk 76.88
CLDX Reports October 31st. If stays under the 50 DMA at 26.33 then still has room to maybe the 200 DMA
Bye For Now
