David Copperfield is a master of sleight of hand. The market is a master of illusion as well. It gapped over Wednesday's high for sure. But once the rabbit was pulled out of the hat, it wiggled its nose at the audience saying, "Oh, you want more, do you? Now, I am going to sit here having given you all I got in the first 30 minutes of the day and just nibble on some carrots." Let's look at the numbers and try to discern reality from illusion.
S&P 500 (SPY) Filled the gap from the drop on 7/23. Closed above the fast moving average. If the week ends over 136.25, will setup for more upside. If not, could see another test of 134.50.
Russell 2000 (IWM) Just eked out a close on the 50 and 200 DMAs. Looking at this, hard to get too excited.Subs: Under S1 and will be looking vulnerable. TWM is the ultrashort to watch
Dow (DIA) Most promising looking of the bunch, but this represents only a few names comparatively. Left a potential island provided it does not break 127.80 area
NASDAQ 100 (QQQ) Back in an unconfirmed bullish phase which means has to hold today's low. And since this did not fill the gap the way SPY did, needs to do that or we are back to examining the illusion.
ETFs:
GLD 157.72 last swing high from 7/03. Big move last couple of days. Would not be surprised to see it restSubs: Booked 1.5 ATRs and now holding tail. Want to see 155 hold
XLF (Financials) Confirmed phase change to bullish. Subs: 14.40 support and 14.50 has to clear
IBB (Biotechnology) Wait a minute, this might keep its monthly higher close intact-if 130 holds that is
SMH (Semiconductors) Unconfirmed recovery phase. Subs: 31.20 is the 50 DMA to hold
XRT (Retail) Subs: Could not return to a bull phase. Would like this better over 58.75. Otherwise, still defensive here
IYT (Transportation) Could not get over Monday high. That is another reason to suspect illusion. Subs: Would change bias if gaps above 89.85 and stays there
IYR (Real Estate) Through 65.15 looks a lot better, but underperformed.Subs: If market rolls over, a correction here is very probable.
USO (US Oil Fund) Another one that could not fill the gap. Subs: Keep eyes here for short opportunities under S1. SCO ultrashort
XLE (Energy) The big winner. Now pressing up against the 200 DMA
TBT (Ultrashort Lehman 20+ Year Treasuries) Subs:Another hold of 14.15 level and could be looking at a confirmed slingshot
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: Subscribers: If you have protected your tweets, I cannot see anything you might try to tweet me. Please go to settings in twitter and uncheck the box that says "protect my tweets." Why is it important to talk to me? Because as you become familiar with the strategies, you can find your own trades. One of the subscribers asked about COG, another about AGU (both recent picks). I was able to guide them and give them confidence to go long. Both trades were profitable and COG was one of the better performers.
Post-Earnings: AMZN If gaps higher, has to hold R1 222.65 EXPE: Look at if gaps above 50.66 all-time high
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:
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:
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:
COST Now, has to clear 96.43 all-time high and hold 95.00
DTV Like to see 48.50 hold. Reports 08/02
TWC Max risk 84.00. 86.30 all-time high
EWW Should hold today's low. Over 62.15, clears the 10 DMA
LEN Inside day. 30.00 is a tight risk area and over today's high gets back over the 10 DMA
EBAY 43.25 is a good risk. 45.48 all-time high which if clears should give this another push up
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:
Phase Change: GOOG Now positive pivots. Like to see 613.00 hold and clear over 618.35 to get going. MOS Positive pivots 57.75 good close risk. Has to clear58.50 to really get going CRUSpositive pivots. Should hold 27.65
Shorts:
Post Earnings: SBUX: Could gap under 49.85 the 200 DMA
Category 5:Titanic-Bear Phase, Negative pivots, not oversold, Risk R1 or previous day high. Target: Day to swingN/A
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 lows
C 26.75 the 50 DMA which cannot clear and should break S1
CAT Inside day. Under today's low lines up with S1. Should not clear today's high
CREE cannot clear today's high and should break S1 and today's low
JCP Inside day. Cannot clear 23.45 and should now fail today's low
Bye for now!