The stage is set for September, but before I explain, let me tell you what the media is going to tell you just in case you haven’t already heard. Yes it’s true, September has the dubious distinction of being the only month of the year that has been down more times than up since 1928. It’s closed down 46 times and up 39 times since 1928. Additionally, no surprise, it also has the worst average return of any other month. It’s average return is whopping -1%.
Here’s another fact about September, The last day of September in any year always falls on a different day of the week from the last day of any other month.
I’ll let you decide which piece of trivia is most useful.
Don’t worry about September’s reputation. Focus on what the market is telling you this year. Last week the market did us a favor. After gapping higher on Monday it tried to go higher, then lower, but in the end it spent the week consolidating. The DIA, SPY, QQQ, and IWM all sit in different locations in their up trend, but they all have a tight week of consolidation. This is enough consolidation to power another nice sized move up or down.
On Tuesday the number of traders focused on the markets will increase dramatically and their first day back will establish a range for Tuesday that will also provide a directional bias for the rest of the week if not longer. Finally, on Friday the market will get one of its most important monthly economic data sets – the nonfarm payrolls. This day will also create a range that can be used to determine the market’s intentions for weeks to come.
So next week look to follow the direction Wednesday takes relative to Tuesday’s range, especially if that extends outside the range of this past week. Then take note of whether Friday’s data reverses or extends the week’s trend.
Until the market takes out last week’s low, I’d have a bullish bias.
S&P 500 (SPY) - Closed at new highs. A break of Fridays high is bullish. Look for support at 200.25 and 199.75-.50
Russell 2000 (IWM) - In the middle of a range. The key levels are 115.50 and 117
Dow (DIA) - In the middle of a range. The key levels are 170 and 171.35
Nasdaq (QQQ) - Strong close at new highs and over 3 days of tight consolidation. Look for support at 99.60 and 99.25
XLF (Financials) - The key range is 23.15 to 23.45. There should be strong support at 23
KRE (Regional Banks) - Basically an inside day on the 10 DMA and the top side of an important support areas of 38.40-.60. A more robust test and hold of this area would set it up for a sustainable move higher, but if the market rallies this is in a good spot to rally from.
SMH (Semiconductors) - A strong day but it all came on the open. Sill looks like a leading group with lots of good looking stocks in it.
IYT (Transportation) - Sitting below 6 days of consolidation. Needs to break 151.10 to move higher. I would not buy weakness here. If it slides under today's low, look for major support at 149
IBB (Biotechnology) - 4 days of well defined consolidation at all-time highs. a breakout could run up quickly. Low side of the consolidation that should be support is 272.80 to 273. If that breaks look for a pullback to support in the area of 270 to 268.60.
XRT (Retail) - Inside day and closed down, but that's ok. It needs a rest. 88.20 is the key support level. If it trades over 89.32 it may run for the highs at 89.74.
IYR (Real Estate) - Closed well and over 3 tight days of consolidation but also makes four days of consolidation within the down day that marks the low of the pull back from the highs. If it breaks Friday's high of 74.20. it should move out to new 2014 highs.
ITB (US Home Construction) - A tight 7 day range on the 200 DMA. 23.75 is the key low level to hold. 24.20 and 24.30 are the levels to break to move up.
GLD (Gold) -Second close back over the 200 DMA, the 10 DMA and 124 which is the swing level to break to move to the upside, but was weak today. If it breaks over 124.35 I'll look for it to move to the top of its multi-month range, 128. If it moves lower, 123-122 levels are good support.
XME (Metals and Mining) - Nice up day but stuck in a range from 42.85 - 44.20
USO (US Oil Fund) - Gapped higher and never looked back. Not surprising based on the patterns I've been pointing out... Yesterday, after 6 days of consolidation it broke higher and closed over the range and the 10 DMA (first time in 5 weeks). If you look at weekly lows there is another trend line from the 2012 lows that comes in at 34. Based on last week's daily action it time to start looking at last week's 34.50 area as potentially a low risk trade to pick a major low. Note: This is following the same pattern as FCG pointed out last week.
XOP (Oil and Gas Exploration) - Nice strong day closed over 50 DMA. Unconfirmed bull phase. Look for support at 78.70-.50
FCG (First Trust ISE Reserve NatGas) - Nice big breakout away from the 200 DMA. If it pulls back look for support at the 20.90 - 21.00 level.
TAN (Guggenheim Solar Energy) - Nice consolidation day right under the 10 DMA and over the 43 level I've been focused on. If it breaks higher, over 43.50, today's low, 43 is a good stop.
TBT (Ultrashort Lehman 20+ Year Treasuries) - TLT - Consolidation day, but pretty volatile, suggesting it may not be comfortable at these levels, it needs a rest or pull back. 118.40 and 118 are areas of support.
UUP (Dollar Bull) - More consolidation around the 22 level that has been hard to break, but it may happen soon. A move over 22.05 could begin the next leg up, but I'm still more interested if it pulls back to 21.80. The weekly base is very impressive.
EEM (Emerging Markets) - Consolidating at key support level of 45.
IFN (India Fund Inc.) - Consolidating nicely over 26.
EWW (Mexico) - Breaking Friday's high, 70.93 is a nice breakout but I'd rather buy against support at 71.60, 71.20 or the big number of 71.
FXI (China Large Cap Fund) - Opened higher but sold off all day. If it breaks 40.30 it could move much lower.
CORN (Corn) - Back down but still in a range.
JO (Coffee) Consolidated under 38, again - that's 3 days in a row. A break over 38.35 would be very bullish. Must hold 36.80 on the down side.
* * * * * Picks * * * * *
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:
PG - 82.50-.80 is a huge weekly inflection point that was broken and now retraced back to. 82.75 is a good support from the last 2 days and 82.50 is max risk.
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 below 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)
FTI - Consolidating under 61.80- 62.00 which is a big breakout. 62.30-.45 is resistance. Use 60.80 as max risk and 61.20 as a good ORR level. The weekly chart basing on the 59 level is the reason to believe this can go much higher if it gets going.
SPWR - 38.335-38.50 is a big daily breakout area but it has had trouble the last two days getting through. An ORR with 38.00 in the stop would would be a more comfortable risk. Max risk 37.50.
GS - 178 is a key level and S1 so and ORR with that in the stop would be great. 177 is also a key level so I'd use that as max risk. Look for resistance at 179 and the swing high of 179.86.
INTC - Nice daily flag broke out. Max risk is 34.60. Look for ORR and support at 34.80-.75. Friday high, 34.94 is significant resistance and a good breakout. The swing high is 35.20.
BRCM - IF it breaks the 39.40-.50 resistance its basically at a 4 year breakout! There is a resistance at 40.50-40.75 Good support at 39.20-.15, and at 38.94.
VFC - Pulled back into support of big weekly breakout. 64.13 is key level to breakout but ORR again 63.90 would be good risk. Max risk 63.48.
CTRP - Key level to break is 64.80 (Friday high) because it has not broken PDH in meaningful way in 3 weeks. Sitting on the 50 DMA and acted well Friday so this my be the correction low. Max risk 63.30.
Category 4: (Rip Tide)
WFM - Two inside days. 39.20 has been strong resistance. 39.50 Is the breakout level. The price and volume pattern over the last month suggest that the bottom is in. Max risk is 38.50
Phase Change:
GDX - Unconfirmed Bull Phase.
Shorts:
Category 5: (Titanic) Bear Phase, Negative pivots, not oversold, Risk R1 or previous day high. Target: Day to swing
SCTY - Confirmed warning phase. Looks like it broke down today Thursday and did not rally Fri. The there is lots of potential support so if its over 69 I won't enter and max risk is 69.70.
MA - If it breaks 75.66 it could fall hard. Max risk 76.50.
WYNN - At a big weekly breakdown level. If gets back over 195.30 then support held so that's max risk.
Category 6: (White Cap)
N/A
Best Best wishes for your trading,
Geoff Bysshe
President
MarketGauge
Filling in for...
Michele Schneider
