How many times this year have we seen a 100 point drop, thebears begin to growl victory, only to see those same bears whimper back to their den a day or two later?
For 2 weeks, we have been watching the trading range in the indices established on August 25th with those lows to September 4th and those highs. Fairly certain the market would reconcile next direction once that range broke either way, what do you do when the range breaks to the downside intraday only to watch the closing prices defend those original numbers?
For the S&P 500 that is not the case. The low to break was 199.39. It did so and closed beneath. In IWM it was 115.17, nope. In QQQsit was 99.03; that held. And last but not least, DIA it was 170.03, like NASDAQ, it held.
So here find ourselves once again with a mixed bag, scared longs, more confident bears and a market that keeps the public thinking “rigged!”
That is precisely why I always go back to the fundamentals of trading with a system-what are the phases of the indices, sectors and groups, where are there divergences (best and worst performers) and ultimately, what is the optimum and clearest risk/reward?
S&P 500 (SPY) 200 definitely pivotal. 198.75 next support then the 50 DMA at 197.21 Subscribers: Positive Negative in all
Russell 2000 (IWM) 114.85 the 50 DMA and now only over 116 does it go back to a chance for higher
Dow (DIA) 170 pivotal with the 50 DMA 168.80
Nasdaq (QQQ) Held 99.00 support with 100 area pivotal and the 50 DMA way down 96.81
XLF (Financials) 23.16 the bottom of the recent trading range
KRE (Regional Banks) Like to see this hold around 39.00
SMH (Semiconductors) Another brick wall high possible
IYT (Transportation) Confirmed a top but we have been here lots of times already only to see it turn around
IBB (Biotechnology) 265 support
IYR (Real Estate) 74.15 area needs to hold
ITB (US Home Construction) Now this starts to look almost predictive since it never really got moving to the upside
GLD Possible reversal candle (possible means has to confirm)
Metals and Mining (XME) Touched the 200 DMA
USO (US Oil Fund) Did not confirm the reversal from yesterday-have to think negative
TAN (Guggenheim Solar Energy) Nasty reversal which is exactly why you never chase in this market if risk is too far away
TBT (Ultrashort Lehman 20+ Year Treasuries) TLTs holding the 50 DMA so far
UUP (Dollar Bull) Could be ready for some correction. FXE possible reversal candle
EWP (Spain) Subscribers: On the 200 DMA
FXI (China Large Cap Fund) 41.50 support to hold
BAL (Cotton) Subscribers: 44.78 the 50 DMA
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:
KSS Over 59.42 looks better and although we are long, putting this on list for day to miniswing traders-like our stop 58.41
Category 2: 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)
THC AN ORR works best now
Category 4: N/A
Phase Change:
GDX Possible reversal candle over the 200 DMA making todays low max risk if clears 24.80 R1
MFC R1 is 20.11 if clears new risk is 19.86
LEN 38.11 is the max risk if this can hold, clear and close over the 200 DMA
WMT 76.19 max risk now with R1 and today’s high lining up 77.09
Shorts:
Category 5: Titanic-Bear Phase, Negative pivots, not oversold, Risk R1 or previous day high. Target: Day to swing
TRIP Already short so for a daytrade could look for an ORR
ARMH 47.55 max risk on an unconfirmed phase change to recovery (worse from accumulation). Under 46.46 has room to 45.30 the 50 DMA
V Inside day on converging moving averages with risk 215.50 and room to 212 or lower
Category 6:N/A
