A couple of signs coming into Tuesday’s session made the rally not only probably but somewhat expected. First, the S&P 500 broke the recent trading range on Monday yet closed within the range. Secondly, the Dow or DIA held on tight and outperformed the other 3 indices.
NASDAQ, although broke the range on Monday, maintained a strong bullish phase. Finally,the small caps, which broke 2 major moving averages, although an important piece of the puzzle, have not been as integral to the 2014 market. Noteworthy, is our second day confirmation requirement, which did not happen. Similarly, now that IWM is back over those major moving averages, it too will require a second day confirmation.
In fact, that second day confirmation is required for Tuesday’s move altogether on the heels of the FOMC decision. Therefore, we are calling this rally expected but also possibly a one day wonder forcing the indices back into a range.
Best news is that the Dow closed on new highs along with many of the stronger sectors, which had a more than decent correction, coming back strong.
If the market continues to hold, there are many places to go for new swing longs. As always,risk/reward will be first consideration.
S&P 500 (SPY) After writing that it still appeared to be coiling and had to take out 199.41, now back to writing about 200 as pivotal. Subscribers: Positive Pivots in all
Russell 2000 (IWM) Taketh and now giveth back-of course, needs a second day confirmation in the unconfirmed bullish phase
Dow (DIA) New high close here.
Nasdaq (QQQ) Came back right onto resistance so really needs the second day here
XLF (Financials) Never broke the downside of its recent range and now has to take out the upside
KRE (Regional Banks) Broke the 200 DMA for an unconfirmed phase change to Recovery. Could be a reaction to anticipating a dovish FED decision-still eyes on
SMH (Semiconductors) Did set up for a low risk buy early on. Now, right into resistance
IYT (Transportation) Rangebound even after Tuesday’s strength
IBB (Biotechnology) Bounced off of 265 and now it too is into some resistance
XRT (Retail) Held last week’s low 87.68 and ran up over the 10 DMA-rangebound
IYR (Real Estate) A little bounce but not too convincing
ITB (US Home Construction) Needs more work but would keep eyes here
GLD If this is the bounce, I would say weak at best and a good short opportunity awaits
USO (US Oil Fund) Good to keep track of yearly lows-when met and an instrument is oversold, you get a really great bounce
OIH (Oil Services) Bounce to resistance
XLE (Energy) Also bounced into resistance
FCG (First Trust ISE Reserve NatGas) Subscribers: Confirmed a slingshot low and watching to see if can clear today’s highs too
TAN (Guggenheim Solar Energy) Subscribers: 42.37 is the 50 DMA risk point. If this clears 43.91 R1
TBT (Ultrashort Lehman 20+ Year Treasuries) Seems to be saying FED will continue taper maybe make a statement about the Fed Funds rate
UUP (Dollar Bull) Totally Consolidating
FXI (China Large Cap Fund) Briefly broke 40 but came back to close well-long term still friendly
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)N/A
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)
INTC 33.92 risk to the 50 DMA and like now if holds 34.50 as well on an ORR or a risk over today’s highs
ODP Although I’m still kicking about this run while I was on vacation, truth is could just be getting going. Risk now 5.68 and has to clear 5.91-could see 6.10 then who knows?
SWI Inside day and great long term chart setup potential if get move over 43.90 and holds 42.80 for swing
HUN Since this is now over the 2007 highs and looking great, if holds 27.95 and can get a good risk, see lots of potential
IBM Reason market held up. Now, 190.25 major support for an ORR and over 193 really good
ETR If holds 75.30 still set up with either an ORR or move over 77.73 the September high
HSP Nudged its head over the 50 DMA which means todays low max risk and if confirms over todays high good swing
M If holds 59.25 like this especially over today’s highs
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:
HPQ 35.80 the 50 DMA to hold and over 36.38 R1 looks better
Phase Change:
PM Had a phase change and if holds 84.50 then the 200 DMA, as you know a fave for long term growth
MRVL If today’s low holds like this over today’s high and also since it is over the 80 monthly for a swing trade
SPLS Against 12.90 still in play with over 13.05 good for more upside
PHM confirmed recovery phase. The overall chart looks good if clears 19.24 the 200 DMA
Shorts: Focus List CAM GLD IYR
Category 5: Titanic-Bear Phase, Negative pivots, not oversold, Risk R1 or previous day high. Target: Day to swing
JOY If cannot clear today’s highs see lots of downside potential longer term
Category 6: N/A
Best Best wishes for your trading,
Michele Schneider
