We came into the week expecting that the plethora of inside dayswe saw at the end of last week, particularly in the indices, were foreboding. Indeed, that’s how the session began.
However, we have several factors we had to consider before we shorted heavily into the morning gap lower. First off, the phases.S&P 500 closed marginally bullish on Friday, now back to anunconfirmed warning phase by end of Monday’s session. Unconfirmed that is, while also holding last Thursday’s lows thus far.
NASDAQ held last week’s lows and 98.05, which is really the place it took off from on Friday. Noteworthy, the phase remains bullish. TheDow took out last week’s low initially, but then proceeded to run up and hold onto 170 plus its bullish phase.
The small caps, aka Russell 2000s, broke last week’s lows by 3 cents and also turned to defend 110-the now home on the range in its world. Phase is bearish as it has been for about a week.
Sectors and groups of note as all held the 50 DMAs:Biotechnology, Semiconductors, Transportation and Financials.
If we look at the Market Internals: Advance/Decline, Up/Down Volume, New Highs/Lows, Market Divergences, etc., the signs are negative. Now that Monday’s action did little to clear the mud, we head into Tuesday with a similar course of action as we had last week-buy in the stronger sectors and groups if the market holds,short the weaker sectors if it doesn’t, and look for significant, high volume reversal patterns. Mainly, try not to drive yourself too crazy as my mom would tell you, “This too shall pass!”
S&P 500 (SPY) 198.25 would be good to clear otherwise, stay defensive and see if this confirms the warning. Subscribers: Negative Pivots in all
Russell 2000 (IWM) 111.67 to clear helps-otherwise, 109.72 key
Dow (DIA) Tested the 50 DMA, held it and now decent close over 170
Nasdaq (QQQ) Tested the 50 DMA, held it and now decent close with 99.20 key to clear
XLF (Financials) Also held the 50 DMA-like QQQ DIA, if breaks the 50 DMA not good
KRE (Regional Banks) Best I can say is that this is holding August lows
SMH (Semiconductors) Also held the 50 DMA-like QQQ DIA XLF, if breaks the 50 DMA not good
IYT (Transportation) Also held the 50 DMA-like QQQ DIA XLF SMH, if breaks the 50 DMA not good
IBB (Biotechnology) Better shape then the others mentioned over the 50 DMA. Strong group.
XRT (Retail) Nice reversal off the 200 DMA but has to clear the 50 DMA
IYR (Real Estate) Inside day on the 200 DMA-very interesting
USO (US Oil Fund) Ran to the 50 DMA-no position-more interested to see what it does from here
OIH (Oil Services) Inside day
XLE (Energy) Inside day under the 200 DMA
XOP (Oil and Gas Exploration) Subscribers: Possible slingshot bottom-has to clear 71.70
FCG (First Trust ISE Reserve NatGas) Subscribers: A possible slingshot on the 80 monthly moving average-as tomorrow is end of month-a close above today’s high worth a try
TBT (Ultrashort Lehman 20+ Year Treasuries) TLTs showing defensive market action
IFN (India Fund Inc.) Subscribers: Like this again if clears the 10 DMA
JO (Coffee) Subscribers: Unconfirmed phase change to bullish
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)
DUK Inside day above the 10 DMA-max risk for a swing is 73.11 and has resistance overhead at 75.00
FB Tricky day but now would watch for an ORR or if gaps higher, a 2 minute entry on the breakaway
SWKS 59.25 highs to clear-57.40 low to defend
PANW Good move over the 10 DMA and consolidating-has to hold 95.80 and really clear over 100.00
IGT Although still has to clear 17.04, 16.80 is a solid risk and 16.95 a good place to begin a position if good
Category 4: N/A
Phase Change:
HSP Nice pop and has to clear the 10 DMA at 52.87 hold 51.75
CREE Had a slingshot on 9/16-came close to those lows and held closing green.41.90 clears the 10 DMA if this is good and has to hold around 41.60
T Long only ½ position will look to add over R1 or around 35.30 the other ½ and use the stop from today or around 34.79
SWI Confirmed bullish- -if this closes out September over 43.40, first time clearing 23 month MA since 2013-would follow for swing
Shorts: On Focus List: COV TTM M UTX PBF
Category 5: Titanic-Bear Phase, Negative pivots, not oversold, Risk R1 or previous day high. Target: Day to swing
GOOG 580 still good resistance should this open below it
Category 6:N/A
Best Best wishes for your trading,
Michele Schneider
