Although it looked like tough going early on, the small caps (Russell 2000s) held the runaway gap and closed well enough to negate the topping candle. NASDAQ same story.Nor do I see anything terribly alarming in the Dow or S&P 500 based on Wednesday’s action. Therefore, let’s call Wednesday a digestion day near the new 2013 highs. The big surprise came out of China and the Emerging Markets, both of which (ETFs) had selloffs on decent volume-liquidation. Semiconductors and Oil and Gas Exploration, both of which had been looking so positive, also sold off hard, beginning with the gap lower. The morals of this story are: 1. Buy and hold can be costly 2. The bigger they are the harder they fall 3. Take profits when prices become extended 4. Pay attention to relative strength and overbought indicators 5. Don’t pay up when the clear cut risk is too far away. 6. Don’t fret on missing any boats-what is great about the market is each day a new boat sails if you know where to look.
S&P 500 (SPY) Friday’s gap low-holding nearly a week-Thursday should prove if that will remain a fact. Subscribers: Negative pivots in all indices
Russell 2000 (IWM) 109.83 is last Friday’s low. Although the market remains strong, a break and close below that level-fair warning.
Dow (DIA) 152.95 is the fast moving average support to hold
Nasdaq (QQQ) 81.35 the breakaway gap low
XLF (Financials) Looking toppy unless it clears back above 20.88
SMH (Semiconductors) Hard to believe in one fell swoop looking at the 50 DMA
XRT (Retail) Need to hold today’s low and try to climb its way back to negate a topping looking candle
IYT (Transportation) Inside day near the new highs. Overbought, but can’t argue with the strength
IBB (Biotechnology) Has to clear last week’s high
IYR (Real Estate) A gap over the 200 DMA would be interesting. Inside day.
XHB (Homebuilders) Subscribers: Took a small profit and holding on as long as the moving averages hold
GLD 129.65 is the 50 DMA. Inside day Subscribers: SLV Crossed the 50 DMA confirming the recovery phase with an inside day
USO (US Oil Fund)Broke the 200 DMA and now oversold
OIH (Oil Services)Why buying new highs can be ever so scary
XOP (Oil and Gas Exploration) Confirmed topping action, especially if cannot recover by the end of the week.
UUP (Dollar Bull) 21.33 now low two days in a row
VXX Subscribers: 12.90 should be support or it was a quick hedge that we no longer need
FXI (China) Unconfirmed distribution phase and oversold
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:
LGF Reports November 7th. After correction to the 10 DMA, if holds today’s low and clears R1, could resume move especially if market recovers
HCA Reports before open October 31st. Like that R1 and today’s high line up and will look at this one carefully for a miniswing trade
NYX Reports November 5th. Like that R1 and today’s high line up and will look at this one carefully for a short term swing trade
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)
Post Earnings: TEX Reported well. If opens over 37.12 is a 2013 breakaway gap. Otherwise, over 35.45 consider this for a new swing position as it crosses the 80 monthly moving average
JNJ Inside day and slightly negative pivots which means a clear signal over todays high and R1 looking for 94.00-95.00
GCI Slightly negative pivots inside day, but looks ready for new highs over R1.
DOV If 89.46 holds, even with the slightly negative pivots, still see a move to 92.50-93.00
REGN Reports November 5th. With 2 inside days and negative pivots for one day, has to clear R1 and today’s high
BBBY If holds 76.40 area with again, negative pivots, then could see move to upside but really has to clear R1 here too
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:
ADSK Reports November 14th. Touched the 50 DMA now good risk and over R1 and today’s high could see move up again
Phase Change:
BXP Reports October 29th after close. Inside day and over 109.69 looks good to maybe 112.
M Reports November 13th. Confirmed phase change to accumulation. 44.14 good risk. One to watch maybe even on a 5 minute opening range
Shorts:
Category 5: Titanic-Bear Phase, Negative pivots, not oversold, Risk R1 or previous day high. Target: Day to swing
ACAD Broke the 50 DMA with risk to 22.51. Looks attracted to break the 200 DMA
Bye For Now
