Except for a few dots of green, this week began precisely how many traders feared it might considering the recent decline of commodity prices.
Glaring divergences coupled with diminishing consumer demand of goods does not equal the new highs the market enjoyed briefly last week. It seems reality has set in just as US households are the most invested in the market since 2000.
I assume most of you who read this daily are either subscribers of Marketgauge or active investors that use systematic entries and exits or at the very least, safe risk parameters. I write this because I wish the public had a better understanding of why they are so often last ones in-or fodder for the traders in the know.
With that said, we have been here before in 2014. The weak longs run for the doors, the market looks like excrement, the bears begin to growl and then, whammo-2 days of 100 point rallies ensue.
I tend to think that won’t happen say, Tuesday or even Wednesday,given certain fundamental shifts such as the increasing number of put option buyers, a “death cross” in the small caps and the deterioration of most big momentum stocks. However, NASDAQ, S&P 500 and the Dow are in bullish phases even after Monday’s damage. In this year of the Horse of a Different Color, I dismiss no possibility.
S&P 500 Super close to a serious brick wall high. Not so easy though with the 50 DMA just below at 197.75 Subscribers: Negative Pivots in all
Russell 2000 (IWM) Unconfirmed phase change to bearish. Held though, support from August 12th.
Dow (DIA) Best shape and first place to look for a long-had a brick wall high but held the fast moving average
Nasdaq (QQQ) Like SPY not a clean reversal and does have a strong underlying upward slope on the 50 DMA at 97.65
XLF (Financials) Held 23.45, which for now is to its credit
KRE (Regional Banks) September lows 38.81 and now back to an unconfirmed recovery phase (worsened)
SMH (Semiconductors) Looks awful but looked worse September 12 and 13th. Pockets of strength for this year are typically where to look first on rallies
IYT (Transportation) 152 big support are or this will decline further
IBB (Biotechnology) Although this failed to make new highs on the last rally, it is holding up relatively well if can hang out over 272
XRT (Retail) Here’s where my concern lies based on the information we have to support a deflationary period. 86.60 is the 50 DMA
IYR (Real Estate) Another major pocket of concern re: consumer activity.
ITB (US Home Construction) Express to bearish phase although not confirmed
GLD First major clue this year that inflation was clearly not an issue-which the FED has been saying
Metals and Mining (XME) Very oversold
XLE (Energy) Dropped to the 200 DMA and registering oversold-daytrade to miniswing bounce possible
FCG (First Trust ISE Reserve NatGas) Subscribers: The 80 monthly moving average is at 18.30
TAN (Guggenheim Solar Energy) Subscribers: Be careful what you wish for-wanted this closer to the 200 DMA. Now, 41.60 is that level and if there’s any oomph up, will look to get in. Over 42.50 clears the 50 DMA
TBT (Ultrashort Lehman 20+ Year Treasuries) Fed really cannot afford to let rates rise
UUP (Dollar Bull) 22.75 is resistance
FXI (China Large Cap Fund) That island top I wrote about in early September haunting this chart. However, I like where it held versus July low
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:
AAPL Classic setup if holds today’s lows and clear first the pivots then R1-can do ½ and 1/2. Once this clears 103, all will sigh relief
KSS Good correction with risk now to around 60.75 if clears the pivots and R1-again-like the ½ and ½ trade
TAP If holds 74.95 area same thing here-1/2 over pivots ½ over R1
Category 2: (Pipeline) Positive Phase, Condition 2-3, 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:
INTC As long as this holds 34.23 over the pivots worth ½ position and can add if keeps firming
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)
PM ORR only now-just now clearing the base so if good tomorrow will still keep an eye on it
FTR Outperformed the market today. Now, has to hold 6.42 and clear the 80 monthly at 6.84 as we end September
ETR Small position now with risk under the 50 DMA-Utility stock which could do well either way. Once clears 77.73 we look golden
Category 4:N/A
Phase Change:
ONVO Another slingshot low potential on the 23 monthly moving average. Has to clear R1 6.76 with risk today’s low 6.17
GT Possible slingshot if holds todays lows and clears R1 24.17-also on the 65 weekly moving average
BXP Still working off the slingshot so like over 117.50 with risk to 114.25 area
XOM Still working off the slingshot so like over 96.97 risk to 95.40
Shorts: On Focus List: KORS HCP V JOY
Category 5:N/A
Category 6:N/A
Best Best wishes for your trading,
Michele Schneider
