In an attempt not to state the obvious, lots of damage done on Friday with SPY down 1.42% and another alarming Distribution day in volume. We anticipated lower prices due to the accelerated warning phase; however, the rapid decline on Friday came as a bit of surprise and perhaps is the "flush" many investors anticipated. I wouldn't get too excited about any prospect of the end of the decline over the intermediate term as the indicators are still negative. However, if one just examines the current phase, the longer term up trend is still intact as long as the SPY holds the 200 day moving average and that that average's slope remains positive. In the near term, not oversold on the 2 day RSI, but approaching oversold on the McClellan Oscillator. The up/down volume also at the lower end. We are getting to or close to oversold levels.
QQQ which had had the inside day last Thursday along with a DOJI candle pattern, made the daily trend on Friday obvious when it broke the lows from that prior day. Now, it is closer to the 200 DMA than SPY, which is still sloping upwards. So, once again, QQQ might give us the more obvious clues as we enter this week. 54.41 is the 200 DMA. But, let's not get too bogged down on that exact number to hold. On the weekly chart, 53.77 is the March 18th low to look at and both the 50 and 200 weekly moving averages still stacked and sloped. And speaking of March, that low was put into place with a spike in volume followed by two inside days followed by another attempt at a sell off, then a gap higher with accumulation in volume. One difference was the slope of the overhead 50 DMA. And that time it was still positive and now negative. But, the bigger point is that anything can still happen since the patient is ill but not necessarily dying.
DIA, which has been the strongest, is not the greatest indicator, but I will note that it is holding the 160 day exponential moving average at 119.15. The 200 DMA is still quite a distance away.
ETFS: SMH is coming into some decent weekly support around the 32 level. 33.55 is the overhead resistance at the 160 exponential. If that level is penetrated to the upside, which could be a first indication of more upside to come. Again, this does not necessarily mean the end of the decline; but at the very least, a sign that we could see a test of the overhead resistance near the 50 DMA or around 35.27. In fact, the beginnings of a summer range of 30-35 in this ETF would not surprise me at all.
IBB** is even more compelling. The leading sector for quite some time now, the slope of the 50 DMA is neutral and Friday's decline brought it to the 70 EMA. The FTP, which it has traded beneath for 3 days, now comes in at 104.07 tomorrow. An open above that area and I would consider a long position for a miniswing trade with a risk to Friday's low.
XRT, another strong sector this year, has a neutral to slightly declining slope on the 50 DMA. Although Friday's decline was worse than the decline of the S and P 500, a move above 49.63 could initiate some buying up to resistance at 51.25.
I covered the short in IYR locking in more than 1.5 ATRs. The slope of the 50 DMA is now declining but 58 on the daily, interim support.
OIH has been battered. Very curious though is that the 50 weekly crossed above the 200 weekly, a sign of a possible shift in trend back to up. 145 is now support to hold. I am not getting bullish necessarily, but certainly cautious selling into the support.
GLD**-although Friday's action was not great, it held 148.07 last swing low. Will watch for an opening range reversal to re enter or use that swing low as a stop if still in. Back above 149.95 and see a better case for this to continue higher.
Last week's game plan was to keep both short and long positions for daytrade to miniswing timeframes. The dollar strengthened which further created havoc in the market. Plus, the Chinese stocks put salt in the wound after an appropriate reaction to bad economic indicators in the US. This week, a similar game plan seems sound. Find out and underperformers and catch the momentum. Focus on retail, possibly semiconductors and biotechnology for strength and commodities (oil, metals-especially SLV) and real estate for weakness.
Picks: To narrow focus, I am choosing mainly stocks that have held up, or ones that look ready for another leg down.
UHS** tested and held the 50 DMA but has overhead resistance at the 10 DMA at 53.10. If it holds 51.80 though, could see a test of the 10 DMA and if the market can recover, has the potential to move up to 55. A failure of 51.80 and can look again around 50.65 where the 70 EMA sits. Day to mini.
ALB* still holding its gap from April 20th. If holds Friday low at 65.46 and gets above 66.25, has the 10 day mov avg to contend with at 67.43, but with a low risk (would not risk more than Friday's low) could see a move back over the 10 with a potential rally to 70. Day to mini
CTXS* provided this holds 78.20, it will hold a gap from April 28th and provide a decent risk in anticipation of a possible rally to 83.50, the 10 day mov avg and beyond. The nearest support for tomorrow is Friday's low at 79.82 with the 50 DMA at 79.92. If comes in higher, daytraders can use 79.38, S1 for closer support and risk. Day to mini
BIIB also holding a gap from April 21st and the 50 DMA at 90.71, which is beneath Friday's low at 91.20. Two days under the FTP which comes in at 91.95 or about .5 ATR for a miniswing. Day to mini
TSL Friday, FSLR rallied and this touched and held the 200 weekly moving average at 18.72 with Friday's low 18.65. 3 days under the FTP now at 18.98 making the risk manageable. Looking for a move to 21 maybe 22 at most. Day to mini
NVDA** Held the 200 weekly mov avg at 16.58 which corresponds well with the 200 daily mov avg at 16.65. With 8 days under the FTP, over 17.20 could see a move to 20. Again, this is a trade for a bounce off of support with good risk therefore, hard to gauge target necessarily. That depends on the overall market and volume that may or may not come into this stock. Day to mini.
ORLY**Inside day and around the 10 day mov avg at 59.43. Thursday was a bullish engulfing pattern. I like when I see that type of candle followed by an inside day, especially since this outperformed the market. Above 59.60, can use S1 or around 59.06 as a risk to see if it can move above Thursday's high 59.90 and onto all time highs and beyond at 63.05 made in December. Day to mini and maybe swing if market firms
CF* I really hate buying strength but this is close to the highs made May 31st at 158.42. If it holds 151 just beneath Friday's low, then can get in with a good risk. If opens higher, consider an opening range reversal. Otherwise, would stay aside until it breaks the highs. Day to mini
Shorts:
DO**Broke the 200 DMA. 67.55 is weekly support off of the 50 weekly mov avg so reluctant to sell weakness. But, if cannot get back above 69. Would look at selling an opening range reversal failure from the highs against the FTP at 68.52. Underlying support at 61.50 Day to mini
ALTR* the 10 crossed under the 50 DMA on Friday which now is a neutral slope. Oversold, but on a rally or OR high reversal against Friday's high at 44.10, can use 44.57 the 70 EMA as a stop. Next support 38.50 area. Day to mini
ATI* Had an inside day on Friday. Closed on the 160 EMA at 61.58. If this comes in lower and fails the 160 EMA and the FTP at 61.73, could have a low risk short anticipating a move to 56.50 level. Day to mini
AMZN ** Tried one more time to surpass the 10 and 50 DMAs. Now, the slope is still positive on the 50 yet the 10 crossed beneath. Above 190.90 would not short, but if it fails 187.50, can use the FTP as near term resistance at 187.87 to see if it can break beneath last week's low at drop to 177 then 174 with best underlying support at 160 if things really get ugly. Day to swing
Have a great Sunday!