Economists predicted the end of Quantitative Easing by the FED. They also predicted no premature rise in interest rates. Economists timely and on the correct side of their predictions-kind of amazing except when you consider that pretty much any astute person could read between the lines regarding the Fed. They have been unwinding the bond purchases, have done it slowly and have double-talked to allay fears with their vague commitment or lack thereof concerning rate increases in the future.
Wednesday, ahead of the FED announcement, for our monthly live coaching we do as part of the premium service, we (Keith and I) talked about volume. Not only why trading liquid instruments for anything less than position swing trades makes sense, but also, how to look at Intraday, Cumulative Volume along with Accumulation and Distribution of volume. We further discussed exhaustion or blow off volume patterns.
Focusing on the indices and their daily volume patterns, all saw blow off volume Mid-October. Since then, looking at NASDAQ in the last 2 weeks, QQQshad 3 Accumulation days of volume (when the price closes green and the volume exceeds the day before). Typically, 3 days or more point to more positive or more upside. Further dissecting the QQQs chart, we see low volume on Wednesday; for a sell off-that’s good. We see an inside day or pause in the action. Furthermore, Wednesday’s action yielded relief of near-term overbought conditions with lots of room to the upside if QQQs can clear 100.56 the 2014 high.
Going out on a limb, the FED and Janet Yellen turned off the spigot at a perfect time. A mother doesn’t just wean a child of her milk and then let him/her starve! First, she ascertains if the infant has grown enough and if the immune system can sustain itself. Then, mother feeds her child a more diverse diet, with a combo of liquids and solids.
Mama Janet has backup for sure (if deflation worsens i.e.). For now, to place a feather in her cap and in the market’s as a whole, the bullish bias remains. However, there is a bib on the baby, just in case it spits up.
“Here a pretty Baby lies
Sung asleep with Lullabies:
Pray be silent, and not stirre
Th' easie earth that covers her.”
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 except QQQs
Russell 2000 (IWM) Confirmed the accumulation phase change which means as long as Wednesday’s low holds, lots of room upside
Dow (DIA) The 50 DMA is 168.81 place to defend
Nasdaq (QQQ) 100.56 the 2014 high, inside day-good one to watch
XLF (Financials) Closed right at 23.44, conveniently the next point to clear
KRE (Regional Banks) Overbought yet in an unconfirmed phase change to Accumulation
SMH (Semiconductors) Confirmed bullish phase and not overbought
IYT (Transportation) Took a rest but still looks fine
IBB (Biotechnology) Knew the possible runaway gap was not really possible up here-not the first place to go on this next leg up in market if happens
XRT (Retail) Confirmed phase change to bullish if holds 86.75
IYR (Real Estate) Good consolidation
USO (US Oil Fund) No positon but very interested to see where this bounce develops
XLE (Energy) Has to clear 86 to keep going
FCG (First Trust ISE Reserve NatGas) Respecting the slingshot low from 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 117.50
UUP (Dollar Bull) A close this week over 22.76 is really good
BAL (Cotton) Subscribers: Unconfirmed phase change to Recovery
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:
CENX Reported Not much of a reaction post market. Now, 25.60 big support and over 27.66 looks better for mini to swing
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)
ETP Long on the reversal. Now, if holds 63.75 area will look for 67.15 or about 1.5 ATRs to take a profit
BAC Will prefer an ORR now to control risk
OVTI If holds 26.13 in good shape with the confirmed phase change to bullish-needs to clear todays highs
LRCX Super tight compression if holds 75.40 and clears 76.06 good for a day to miniswing
JWN Like the ORR today but waited since it happened late. Now, 70.70 big support and over 71.45 looks better for a day to mini
Category 4: N/A
Phase Change:
PAA Reports Nov 5th. A good start would be opening over 56.08 R1, Risk is under the low if this holds and clears the 200 DMA
WFM 40.00 is key
OC Will give this a bit more time-but not much more-has to get above 32.00 by the end of the week or we are gone
INTC ORR end of day. Now, over 33.96 the 50 DMA, looks better although a bit overbought
LULU Quiet but keep watching it anyway if holds today’s lows now that it had an inside day
JBLU Unconfirmed phase change to bullish if holds 11.15 today’s low
Shorts:
Category 5: Titanic-Bear Phase, Negative pivots, not oversold, Risk R1 or previous day high. Target: Day to swing
MON If we get a clean risk to 113.10 the 50 DMA, then still worth a day to miniswing short
JOY If cant clear the FTP still weak with move to 50.50 then perhaps lower-daytrade
NFLX Looking for 360 if cant clear 383.90
Category 6: N/A
Best Best wishes for your trading,
Michele Schneider
