Remember the comment from Tuesday night and the possible sacrificial lamb theory on the small caps-or how they were where the whole correction lived?
I looked up sacrificial lamb in Wikipedia. Here’s a direct quote, “Asacrificial lamb is a metaphorical reference to a person or animal sacrificed (killed or discounted in some way) for the common good.”
If that is true-we can thank the small caps for taking the brunt and giving us some great buy opportunities on this turnaround Wednesday. I also find the lamb metaphor somewhat auspicious on the evening of the Jewish New Year, Rosh Hashanah! Happy New Year!
Now of course, we look for follow through. Can NASDAQ take out the recent highs? Will IWM muscle up to 114 and hold 110? Can SPYclear the 10 DMA? Those are the questions one must consider as we head into Thursday and Friday. If yes, good chance we see another round of new highs. Otherwise, this becomes a one day wonder once again leaving both bulls and bears frustrated.
Those noteworthy sectors that tested the 50 DMA were some bright spots such as Semiconductors-no surprise. There are also several beat up ETFs that had possible reversal candles, making for somelow risk setups if we do indeed see follow through from the overall indices.
S&P 500 (SPY) Tested early on the 50 DMA then turned around and closed well. But was that well enough? Subscribers: Positive Pivots in all
Russell 2000 (IWM) Likes 110 since it tested there in August. Now in its current bear phase, we have to think more of a short covering rally today. Seems 114 area resistance should stick
Dow (DIA) Held 170 and recaptured the 10 DMA-until this clears recent highs, this could be just another test of its range high
Nasdaq (QQQ) Best hope delivered with a strong move over 99.50-now, that goes back to pivotal with 100.56 the elusive high to clear
XLF (Financials) Although certain bank stocks did great, the ETF held but did not wow
KRE (Regional Banks) Needs to do way more to be impressive
SMH (Semiconductors) Good day separating itself from the 50 DMA-again, the recent highs have to clear
IYT (Transportation) Bounce off the 50 DMA-needs to hold
IBB (Biotechnology) The winner with the low early on at 272 and a big move up from there to new highs.
XRT (Retail) Unconfirmed bull phase-the big concern unless it confirms the better phase
IYR (Real Estate) Still scared of rates, it closed red and on the 200 DMA
ITB (US Home Construction) Very similar to how KRE looks. Needs to do more to impress but has possibilities
GLD Had one brief rally then sold off back to looking weak and vulnerable
Metals and Mining (XME) Knew that was a weak bounce on Tuesday-now even weaker still
USO (US Oil Fund) Under 34.00 more downside expected
OIH (Oil Services) Good comeback with resistance now at 35.40
XLE (Energy) Weird looking doji on the 200 DMA
FCG (First Trust ISE Reserve NatGas) Subscribers: The 80 monthly moving average is at 18.30 which held today and this could have had an interesting reversal if confirms
TAN (Guggenheim Solar Energy) Subscribers: We are long but most of the move was made overnight as this closed up 1.87% and did not do much intraday. Now, back in unconfirmed bull phase and we look for it to confirm to stick long
TBT (Ultrashort Lehman 20+ Year Treasuries) TLTs broke down from the 50 DMA-maybe that was it for them on this bounce
UUP (Dollar Bull) 22.75 is resistance
EEM (Emerging Markets) Possible reversal bottom if confirms
IFN (India Fund Inc.) Yup, held up this week and looks good to new highs
EWP (Spain) Subscribers: Good spot to hold on the monthly so still watching
FXI (China Large Cap Fund) Really nice move off the July lows into some resistance
CORN (Corn) Subscribers: Possible reversal candle
JO (Coffee) Subscribers: If can clear and hold the 50 DMA could be interesting again
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: N/A
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)
ANN Started coming back today-now like on an ORR best to control risk
CYH Big year, but in the right sector with now consolidation –over 57.72 clears the highs for a mini swing trade risk
PANW Improved in condition back over the 10 DMA. Now, 98 max risk-good for a swing as a Nugget
PX Great comeback with 132.50 max risk and over 134.06 clearing a neckline for a mini to swing
TAP We did as a daytrade. Worked as a mini better-now have to wait for an ORR to control risk
FB Inside day near the highs. Like for miniswing risk if sets up 77.10 max risk and over 78.63 especially on a gap, compelling
AAPL Inside day with negative pivots but keeping it here cause its AAPL. Has to clear 102.94
TWTR Now positive pivots with 53.64 the old high and a good ORR as well
Category 4:N/A
Phase Change:
IPG Possible slingshot off the 200 DMA good risk to todays lows and has to clear R1 at 18.40
RIO Long a wee bit to see if this confirms an island bottom
IGT Back to unconfirmed bull phase-still has to clear 17.04 and now hold 16.80
Shorts: On Focus List: QIHU OWW
Category 5: Titanic-Bear Phase, Negative pivots, not oversold, Risk R1 or previous day high. Target: Day to swing
PSX confirmed phase change to warning. 84.40 max risk and see this as topping out on the weekly chart-need to get short on best risk-probably miniswing
Category 6: White Cap-Having a 2-3 Day correction over the pivots.. In a Negative Phase, Positive Pivots. Can sell an Opening Range High Failure if happens below R1 or previous day high whatever is higher and/or weakness if breaks S1 and prior day’s low
DTV Not a bear phase but closed weak. If cannot clear 87.10 looking at a day to miniswing short
Best Best wishes for your trading,
Michele Schneider
