Disassociation as it relates to traders and investors means having the ability to cope with the distresses and successes of the stock market by remaining completely open and objective. In other words, to have the ability to keep pre-conceived thoughts and opinions that inhibits flexibility at bay. If one looks at the S&P 500daily chart, the market clearly put in a peak top on September 19th, or 7 trading days ahead of the closing bell this past Friday when the market tumbled throughout the session in what many saw as the “first” reaction to a possible government shutdown. Here’s my point. If one knew nothing about the world events, remained in a dissociative state from the news and the media and just looked at charts as the predictor, or as some technical analysts would say: “Price tells all,” then one would have traded defensively since September 19thand possibly hedged any long positions at least with some strategy in place for the equation that uncertainty yields volatility. With that said, Friday’s action certainly saw the volatility increase, yet the market is maintaining pockets of brilliant strength and pockets of true deterioration. The small caps or Russell 2000smay not have made new 2013 highs after 3-4 attempts to do so, but it also closed only marginally lower for the week. NASDAQ closed marginally higher along with Biotechnology, or the ETF IBB and Retail (XRT). Real estate, (IYR), and the Financials (XLF), got hit much harder. The Dow went back to anunconfirmed warning phase doing its dance around the 50 DMA. And there you have it-pockets. As we begin this week, keep eyes on the S&P 500 in particular since it landed right on the 50 DMA. A gap below, prepare for more sell off, while a hold and pop suggests the market doesn’t believe that government tomfoolery will have any long lasting impact. And of course watch NASDAQ and the Russell’s as well, for if the strength abates, those signals should be taken seriously.
S&P 500 (SPY) That law of attraction to the 50 DMA was strong enough to become a self-fulfilling prophecy. However, the gap higher on September 10th-that low price-168.26 is holding thus far. That’s where you should look for support or failure. Subscribers: Negative pivots in all indices
Russell 2000 (IWM) A long drop to the 50 DMA which would be real ugly for the entire market unless this holds 105.80-then take that as a good sign
Dow (DIA) Weak unconfirmed warning phase
Nasdaq (QQQ) Similar to IWM-long drop to the 50 DMA which I shudder to think about. Over 79.50, very good sign
ETFs:
XLF (Financials) Not looking too pretty right in its warning phase
SMH (Semiconductors) There was a breakaway gap on September 16th-the low was 39.78-where I would watch for support or failure
XRT (Retail) As mentioned closed higher for the week. However, that is after failing during a more roseate market, to clear 2013 highs.
IYT (Transportation) Gap lower after Thursday’s inside day. The 50 DMA is not too far so back to the law of attraction theory-one more warning to heed
IBB (Biotechnology) Didn’t clear the new 2013 high but closed well
IYR (Real Estate) Only a gap higher now would convince me to jump back in
XHB (Homebuilders) Looks like its deteriorating from its topping candle on September 19th.
GLD Now, have to wait to see what happens around the 50 DMA or 130.00
USO (US Oil Fund)Looks heavy
OIH (Oil Services)Looks heavy yet holding some crucial support
XLE (Energy) 50 DMA so very close now
XOP (Oil and Gas Exploration) One of the better looking sectors-Has to clear 66.80 now Subscribers:Still looks great longer term
TBT (Ultrashort Lehman 20+ Year Treasuries) TLTs Held 106-looks like it wants to tackle the weekly moving average at 107.85
VXX Subscribers: 14.44 resistance and now should hold around 13.90
EWG (Germany) long term picture looks positive Subscribers: Over 28.02 should continue after the runaway gap from 9/16
FXI (China) Subscribers: Getting ready to look at this long if holds 37.13 the 200 DMA and clears Friday’s high
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:
BYD Held the 10 DMA making the max risk 13.90 and has to clear 14.25 Friday’s highs and R1. Clearing the 80 monthly now.
NSM Inside day with tight risk to 56.65 and if clears 578.08 has upside to new highs
Category 2: (Pipeline) N/A
Category 3: (Double Up) Positive Phase, Condition 1 through 4, Positive Pivots which means can eitherbuy 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)
TRIP Already long for swing but now, if takes out Friday’s high will look even better. Risk 74.45 now
USG 27.70 should hold and since over the 80 monthly still looks good longer term. Has to clear recent highs now
ALXN Nice mover Friday-now has to clear 116.75 and hold 115.00 to see around 123.00
LO we have the 1/3 position on but for adding, want to see 44.90 hold. Over 45.60 see a possible test of 2013 high 46.81 or better
FOSL Long for swing and now has to hold Friday’s low and get over118.00 to show real signs of strength
LTD 2 strong days to end the week so now a candidate for new highs if 60.15 level holds
YOKU Neutral pivots inside day. 28.90 point to clear and27.45 point to hold
GPOR inside day and has to hold 62.34 Thursday’s low then clear R1 63.70
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:
APA Oversold with a hammer doji inside day. If holds Friday’s low, would take a look for a move up to te 2013 highs and possibly beyond.
Phase Change:
JPM New stop on the balance around 51.59 and over 52.56 should test the 50 DMA overhead
WY Should now hold 28.50 area and if good, climb to the 200 DMA
BXP Friday’s low important support and has to get over 108.37 to keep going
BEAM Marginally bullish phase if Friday’s low holds and Friday’s high clears
X 2 choices-wait to see if drops closer to the 200 DMA and try a low risk entry or if it clears 20.70, then take that as a sign correction over
Shorts:
Category 5: Titanic-Bear Phase, Negative pivots, not oversold, Risk R1 or previous day high. Target: Day to swing
ESV 53.90 would take this down to new lows with support around 51.00
DUK the 50 DMA at 58.06 major resistance and risk and if breaks 66.00 could see a move down to around 61.00
IBM Under 186.37 takes out the gap from 09/10 and should bring this down to the 200 weekly moving average eventually at 172.00
Bye For Now
