It’s one thing to be grateful for calm, but what emotion does this exuberance evoke? Cheers or Fears? Some live in perpetual fear, which is why the market tends to climb the Wall of Worry.
Monday night I wrote that the S&P 500 had an inside day right beneath the 50 DMA and a gap above the 50 DMA on Tuesday, given the other positives (strong sectors), would advance the market from tricks to treats.
Indeed, SPY gapped up above the 50 DMA, danced around it throughout the morning, and then proceeded to take flight. Now, we are looking at anunconfirmed Bullish Phase. (The DIA exactly the same scenario).
My vote for most amazing trick goes to the performance by the Russell 2000s or small caps. David Blaine, the Illusionist, once did a trick where he reached into a girl's mouth and pulled out two of her teeth. The girl was screaming and licking the gaps in the front of the mouth where her teeth had been. Blaine then put her teeth in his mouth and spit them right back into place. (I would not try this at home!)
IWM seized the Bear’s teeth by running up over nearly 3% taking out the 50 DMA and going into an unconfirmed Recovery Phase, then Accumulation Phase. Will IWM spit those teeth right back?
Actually, Tuesday’s session mainly pulled the teeth from the mouth of the bears in Oil and Gas, Energy, Regional Banks and China. These had the highest percentage gains across the board.
The 2014 high in NASDAQ is 100.56. The Relative Strength Indicators are now overbought. Wednesday we will hear from the FED. Most Economists predict the end of Quantitative Easing. That leaves me watching rates, particularly the TLT/TBTs carefully.
I will also watch volume patterns. The double/triple the average volume we saw at the bottom of the correction mid-October was our best clue. Now, looking atNASDAQ on this rally, volume has been less than spectacular. That could mean this was the rally to short OR the best is yet to come. That might be when John Q. Public rushes in to buy, we see prices and volume surge; next thing all the Public wants for Christmas is their two front teeth (back).
S&P 500 (SPY) 196.83 the 50 DMA to defend with a lot of overhead resistance to deal with Subscribers: Positive Pivots in all
Russell 2000 (IWM) Took out the 50 and the 200 DMA which both need to hold up to confirm one or the other of the phases. 112.13 clearly gives this the most room
Dow (DIA) The 50 DMA is 168.80 place to defend
Nasdaq (QQQ) 100.56 the 2014 high and now, going to be all about defending 98.00
XLF (Financials) 23.11 the 50 DMA to defend with 23.44 next point to clear
KRE (Regional Banks) Overbought and close to resistance, but amazing move
SMH (Semiconductors) End of day cleared the 50 DMA for an unconfirmed bullish phase
IYT (Transportation) New highs-we looked at the strength coming-but how many really expected this last 2-day move?
IBB (Biotechnology) Hard to believe, but could be a runaway gap at the new highs
XRT (Retail) Unconfirmed phase change to bullish if holds 86.75
IYR (Real Estate) Not quite new highs but getting closer still
ITB (US Home Construction) Closed at 24.26 but not the excitement of the other sectors that moved big
GLD (Gold Trust) First time in a while SLV outperformed-worth watching that ratio
Metals and Mining (XME) Wrote that this was coiling over the weekend, then Monday it sold off-today was pay day for those who stuck with it
USO (US Oil Fund) Bounced but not enough to get it over the 30.91 pivotal area
XLE (Energy) Has to clear 86 to keep going
FCG (First Trust ISE Reserve NatGas) Respecting the slingshot low form earlier in October and now has to clear 16.00
TAN (Guggenheim Solar Energy) Subscribers: 38.50 next point to clear
TBT (Ultrashort Lehman 20+ Year Treasuries) TLTs 120 pivotal unless this begins to break further below 118.70
UUP (Dollar Bull) A close this week over 22.76 is really good
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:
ETP Classic Condition 1 with 64 pivotal at the pivots and R1 64.55 R1 to clear. The 10 DMA or risk is 63.25
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)
ULTA ORR now best to control risk-target is 124
BAC 16.65 should hold now if this is good and over 16.80 better for a swing
LRCX Inside day near the highs with a fairly tight miniswing risk to 75.00 and over 76.00 the signal is good
HUM Huge bullish engulfing pattern and now, overhead resistance at 135.86 to clear to see new highs-day to miniswing
JWN Negative pivots but leaving it here since if holds 70.22 and clears 71.69 R1 could see a move higher
Category 4:N/A
Phase Change:
X Reported. The 50 DMA is 38.22 to clear for now a swing trade to the days lows if does
PAA Reports Nov 5th. A good start would be opening over 56.22, then has to take out R1 Risk is 55.50
WFM Confirmed phase change to recovery-looking for a move ahead of earnings. 40.00 is key
OC Inside day with hopes to see R1 31.52 clear to get this going again
INTC Didn’t do much until the end of the day. The 50 DMA to clear 33.97 and 33.40 place to hold
RCL Look for an ORR to control risk and thinking miniswing at most
LULU Quiet but keep watching it anyway if holds today’s lows
JCP Defensively took off ½ which we would only add back now over today’s highs and R1 7.56
Shorts:
Category 5: Titanic-Bear Phase, Negative pivots, not oversold, Risk R1 or previous day high. Target: Day to swing
DTV Inside day and remains under resistance at 84.57 and R1 if fails 83.94 still can see the 200 DMA or lower
Category 6:N/A
Best Best wishes for your trading,
Michele Schneider
