Prepared by Geoff Bysshe, Co-Founder of MarketGauge, filling in for Mish.
The Confirmed Bullish Phase Shows Off Its Influence
Hi Lincoln,
Tuesday was perfect example of pre-holiday bullish drift. Very often the market will move effortlessly higher leading in to a holiday. In bear markets you get the opposite effect. Don't be fooled, the bulls don't have it this easy going forward.
Thursday and Friday will be completely focused on jobs data which could move the markets dramatically. After such a big move off of last Thursday's lows I'd tend to believe that good news keeps the markets up, but doesn't lead to a substantial advance. On the other hand, bad news will lead to a significant test of the support levels mentioned below.
S&P 500 (SPY) There is a pretty clear path to 139.40, but that's a lot to ask for without a few pauses. Look for resistance at 138, 138.60, and 139. It would be healthier to test some support and consolidate first, and support levels to watch are the 136.30 and then 135.80. If the bulls are really strong it will hold its pivot around 137.
Russell 2000 (IWM) The biggest percent mover of the market watch 4 again by a long shot. This action is too "far to fast", but until it reverses don't fight it. The next level of resistance is 82.50. Support is 80.50 down to Tuesday's low of 80.43. The next level after than is 79.20.
Dow (DIA) Just poked its head over the June highs. Now, any trading below Tuesday low, 128.24, would be a warning sign of trouble. Until then look for it to hold 128.70, and find resistance at 131.20-.40.
NASDAQ 100 (QQQ) Like the DIA it finally cleared the June highs, and as a result, a quick reversal below the Tuesday low, 64.29, would be negative, but until then look for it to hold 64.40 and find resistance at 65.04, 65.83 and 66.18.
ETFs:
GLD Gapped over the 50 DMA, but it has not been able to continue beyond the 50 DMA in its last two attempts. It needs to close over 158.40 to prove its bullish strength.
SLV Monday proved to be an inflection point and the gap higher today makes the 6/28 low look like a beautiful long-term double bottom. However, even if that proves to be the case, there's more work to be done on the upside. 28 is a big resistance area, 26.90 is the big support that the bulls should hold. And a weekly close above 27 would represent the first close above the prior week's high since the Feb. 2012 highs!
XLF (Financials) slow and steady climb. 15 is a MASSIVE inflection point based on swings , and the trend line from the 2012 highs comes in around there too. If you like trend lines, draw the support line from the Oct. 2011 lows. Today is the first close back over it. When it falls back down look for support at 14.60 and 14.50.
IBB (Biotechnology) I'd like to be taking the drugs this ETF is on! Up nearly 7.5% since last Thursday's lows and this is at all time highs, not recovering from a crash. Just watch for a pull back, and trade stocks in the group.
SMH (Semiconductors) Yesterday was the inside day on a death cross. Today nudged higher but not beyond the outside day of the pattern. Subs: watch this along with the semiconductor stocks on the Evening Watch closely! Key levels in SMH are 33 and 31.60.
XRT (Retail) Tried to clear 60 but 60.10 held it in. Breaking 60.10 could lead to a nice leg up, but consolidation first would make for a better long trade setup. Look for support at 58.90, and consolidation before trusting the now confirmed Bullish Phase
IYT (Transportation) Subs: Still long for swing from 90.05. Inside day on a big up day in the markets. 91.60 is the key support, and 95 is the big resistance level.
IYR (Real Estate) Reached a 3-year high today. Very impressive, but unless it is taking IBB's meds - it needs a rest.Wait for a set up.
USO (US Oil Fund) In May and June oil experienced the most viscous decline in nearly 10 years so it's no surprise that the snap back has been this impressive. Today's 4.5% move, mostly on a gap, should be watched closely. But wait for a set up. If you want to be bullish on stocks, then you want oil to stabilize which would suggest the world will show some economic demand. But now a trade back to 30.50 would still be considered a health pull back to me. That's also a nice move even for a short trade! 34 is major resistance, a reversal below a prior day's low should get your attention as the trend is still down.
OIH (Oil Services) Draw the support line from the July 2009 swing low on a weekly chart and you'll see why it's more than just USO's bounce that should have you looking for a bottom here. Today's the first close over the 50 DMA in 4 months and the slope is quite negative so expect a pull back. Then we'll see what the bottom looks like.
XLE (Energy) Yesterday I wrote "A break over 66.70, it could run to 68.70 quickly". Today's high = 68.70. I didn't expect it in one day, but I hope reading this teaches you how I saw the levels! Look at the weekly chart and draw the trend line from the 2009 lows to the 2010 lows and you'll see what's happening. The 200 DMA is holding it in now so we'll look for a pullback pattern to enter safely in this new Accumulation Phase.
A note about today's stock selections. Due to the significant run up in the market over the last several days I've focused on stocks that have a pattern of consolidation. As a result, many of the selections are capable of big moves in either direction so adhere to your stops.
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: Harder to find until we get a correction. Nothing with an RSI over 92 on list and even the picks not overbought, looking at tight risks right now.
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:
SGEN - Must hold Tuesday low of 25.54. Look for move higher to begin if clears 26.10.
TRIP - Pivots are negative so must be over 45.64. Would like to enter over 46 and watch for resistance at 46.60 which is significant.
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:
AGP- Negative pivots so only consider on a breakout of the FTP at 65.04, then even more compelling at a break of 65.70.
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:
SYK - Inside day after a flush to the downside the day prior, must hold 54.41. Look for a move high over 54.92.
ULTA - Positive pivots with good support at 93.20 and 91.80, S1, level. Look for an entry that accommodates either level in your stop.
GILD - Already long and would not chase it higher. However, there is such a good inflection point at Tuesday low area, 51.30, that I'd use that as a stop and look to add or initiate a new position on a reversal above 51.60.
NXPI - Two inside days. 23.81 is the breakout. With positive pivots you could try to anticipate the breakout with an OR Reversal trade over 23.20, but it must hold 22.89.
ARNA - Fourth day of consolidation and an inside day. Positive pivots but I'd wait for the breakout over 10.17
NSC - Positive pivots, but wait for the breakout of 72.17. Must hold 71. A move under 71 is worthy of a short trade, so be careful.
KLAC - Keep an eye on SMH along with KLAC. This is ready to move big in either direction after 2 days of consolidation on the 50 and 200 DMA. Must hold 48.42, but pivots are negative so best to only consider trades over FTP and 49. Look for move high after break of 49.10.
BEAV - Could go either way. Positive pivots create a nice OR reversal potential against a big inflection area at 43.75. A breakout over 44.50 is also a big opportunity.
ROSG Volume showed up again today, 12.60-.70 is a big resistance area. Holding long with stop below 11. Watching closely for big volume, then follow through.
Other longs:
YUM Holding the 200 DMA and consolidation. Negative pivots so prefer any entry to be over FTP area of 63. Move over 64 is what it needs to get going.
Shorts:
I wasn't going to recommend any shorts because of the short trading day (no pun intended) but I couldn't ignore the condition I see in many of the China related stocks - these are all at inflection points that could lead to big drops if they break. If they are all getting hit it will be even more compelling to act.
Category 5: Titanic Bear Phase, Negative pivots, not oversold, Risk R1 or previous day high. Target: Day to swing
NTES - Pivots are negative. Must be below 59.20
LVS - Inside day could go either way because at support but trend is down. Do not short above 43.40. Breakdown to follow is below 43 and 42.80.
FDO - Inside day could go either way. Must be below 68. The breakdown begins under 66.60
WTW - 3 days of consolidation within a big volume low bar. Must stay below 50.70. Don't short over 50.40. Breakdown level is 49.90. Big support at 49 which is about half an ATR from the breakdown.
LULU - Inside day that could go either way after 3 days of consolidation within a big volume bar breaking the 200 DMA. The move from here could be big. Shorts must be below 58.50. Breakdown begins below 57.29. Key levels on the way down are 56.83 and 56.21.
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
BIDU - Pivots are positive so looking for a resumption of the down trend after this inside day. However this has just held major weekly support so keep stops tight. If it breaks 113.81 it will be below FTP. 112.35 is the inside day breakdown and below S1. This breakdown is worth a mini-swing stop.
Have a Happy Independence Day!,