This year, one can begin every conversation about the market with, “I’ve got good news and not so good news”. I don’t know about you, but as soon as anyone starts a conversation like that, through clenched jaws, I ask to hear the not so good news first.
We came into last Friday’s session thinking that the market might finally be ready to settle down some, decrease volatility and elucidate direction. We also hoped that the Russell 2000s would at least hold their own while the other indices strengthened.
The not so good news is that the volatility index closed red for the week, nevertheless defended the weekly low as if to say, we acquiesce but do not surrender! Retail dragged some while the Oil and Energy sectors can’t seem do a Houdini and untie themselves from their anchor while underwater.
The Russell’s wound up with an inside day-markedly indecisive but at least closing green and defending the pivotal level of 110. That’s the lukewarm news.
The best news is that the good news outweighs the not so good news asNASDAQ improved its phase to Bullish-although as I always remind you of, needs a second day to confirm that change. The S&P 500, although couldn’t clear the 50 DMA like NASDAQ did, at least flexed its muscle. The Dow, with its island bottom, appears in good shape as well.
Semiconductors and the Financial ETFs performed well to finish out the week and of course, Biotechnology remains lit up with the race for an Ebola vaccine and perhaps a surge in Antidepressant sales.
This week, with regards to the contrarian nature of 2014, begin by looking at thesmall caps (Russell’s) and which way the inside day range breaks. Look fordeflation fears rearing its ugly head again given the dwindling oil prices. Furthermore, watch interest rates which firmed for the week. A move back into the long 20-year Treasury Bonds could also spell trouble.
Otherwise, if we see follow through in the direction the market seems to want to go in, perhaps the spell of the contrarian has broken just in time for Halloween (that, or the Antidepressants kicked in!)
S&P 500 (SPY) The overhead resistance 196.80 (sloping up) at the 50 DMA is now less palpable. 194.50 the place to defend Subscribers: Positive Pivots in all
Russell 2000 (IWM) 110 Pivotal, 108.80 support then 107 and overhead resistance at 112.20 (declining slope) the 50 DMA
Dow (DIA) The 50 DMA is 168.74 resistance with 166 the number to defend for sure
Nasdaq (QQQ) Unconfirmed phase change to bullish-needs another day
XLF (Financials) Unconfirmed phase change to bullish-needs another day
KRE (Regional Banks) Needs to clear last Thursday’s high to stay in the game
SMH (Semiconductors) 46.92 the 200 DMA and overhead at 50.19
IYT (Transportation) Looks good especially after strong earnings out of United Parcel Service
IBB (Biotechnology) Wowza!
XRT (Retail) Confirmed warning phase over the 200 DMA 84.71 pivotal with 86.69 the 50 DMA to clear
IYR (Real Estate) This does have the look of something that can go to new highs
ITB (US Home Construction) Confirmed the Accumulation Phase, looking good over 24.26
GLD Inside day with 119 pivotal
Metals and Mining (XME) Looks like its bottoming
USO (US Oil Fund) Down on Friday but didn’t take out recent lows at least
OIH (Oil Services) Maybe coiling
XLE (Energy) Like OIH, maybe coiling
XOP (Oil and Gas Exploration) Same-could be coiling
TAN (Guggenheim Solar Energy) Subscribers: Over R1 37.57 should play some catch up
TBT (Ultrashort Lehman 20+ Year Treasuries) TLTs broke 120 which remains pivotal unless this begins to break further below 118.70
UUP (Dollar Bull) A close this week over 22.76 is really good
IFN (India Fund Inc.) Subscribers: Looks good here
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:
ULTA Classic condition 1 stock in correction with risk to 115.44 the 10 DMA and over pivots 117.35 can look at ½ positon over 118.41 R1 the other ½ to see if this can get to 124 in a good shopping season
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)
HUM Over 133.78 is sort of a close your eyes scenario and do a miniswing trade
ETP Over 65.27 or R1 like form a mini with risk to Friday’s lows
Category 4:N/A
Phase Change:
ONB will have reported as of the open. The 50 DMA is 13.04 for a swing with risk to 12.60
WAG Could be bottoming but not the best trading stock-watch for an ORR mainly
THC 2 doji days with 56.40 the support and a move over 58.72 should get this over the 50 DMA miniswng
OC We got in because it cleared the pivots and held S1. Now, if opens over 32.22 then clears the 50 DMA-excellent swing trade to hold onto
CCL right under the major moving averages which means if clears 38.55 could see a good miniswing to swing trade using the low of the day as a risk
JCP Have a wide stop, but want to see this hold 7.35 really
Shorts:
Category 5: Titanic-Bear Phase, Negative pivots, not oversold, Risk R1 or previous day high. Target: Day to swing
MON If cannot clear 113.57 look at another shot at shorting this with a possible move to 110. 50 then can reassess
DTV Inside day and remains under resistance at 84.75 and R1 if fails 83.63 still can see the 200 DMA or lower
Category 6: White Cap-Having a 2-3 Day correction over the pivots.. In a Negative Phase, Positive Pivots. Can sell an Opening Range High Failure if happens below R1 or previous day high whatever is higher and/or weakness if breaks S1 and prior day’s low
NFLX At some point this will break S1 after the run to the 10 DMA-watch for that
Best Best wishes for your trading,
Michele Schneider
