Prepared by Geoff Bysshe, President of MarketGauge, filling in for Mish for Until November 19th.
The QQQ's weekly RSI is now at a level not seen since the dark days of the 2008 collapse. The biggest difference this time is that the market doesn't seem to care. Volume in all the indexes was above average but noteworthy. The price action was more of the same - choppiness that moves lower.
In the upcoming weekend Market Outlook I'll cover the oversold readings based on market breadth. The markets are all getting stretched into very oversold levels, but until there is some kind of positive price action there is no reason to try to pick a bottom yet.
S&P 500 (SPY) Into the gap from 135.26 to 134.56, but the bigger number to watch is the 133 area. Look for strong resistance at 137.40 area. Subs: look to sell a reversal, must get a positive daily pattern or pivots to consider anything long.
Russell 2000 (IWM) Stopped at support mentioned here yesterday (76.25 area). Let's see if it can consolidate. Strong Resistance at 78.60.
Dow (DIA) Now sitting on its 65-week MA at 125.50. It has decent weekly support in the 124 to 124.70 area
NASDAQ 100 (QQQ) AAPL broke its 5 day consolidation low and a major swing low from May of 2012. Watch this situation closely.
ETFs:
GLD Broke down below the 166.60 support and the consolidated all day. It still feels range bound.
SLV Sold off significantly with GLD in the morning but held its range much better. 31.00 is still the big area to hold.
XLF (Financials) Touched down on the 200 DMA at 15.05 area. The 200 DMA has been support in the past and the 15 level has also been pivotal so this is a logical place to rest. And today it had an inside day.
IBB (Biotechnology) stopped at the 200 DMA and well above its 3 day low. It's in a good spot to consolidate.
SMH (Semiconductors) Stuck in a wide multi-month range. Until clears the 50 DMA, or tests the lows near 29.60, stay away.
XRT (Retail) It's doing its best to hold on to the 200 DMA level. After and early morning break down it held up better than the major indexes. I'd like to see a close over the 3-pivot high at 60.65 before considering any long trades.
IYT (Transportation) 86.50 is where you can look for a range based reversal if a daily pattern suggests one. Not yet.
IYR (Real Estate) The second day of very big volume and touched support from June 2012. Maybe this is where it will consolidate. Wait.
USO (US Oil Fund) Now has 7 days inside the 11/7 range. Could break nicely either way, but phase is bearish. For shorts look at (SCO)
XLE (Energy) Acting just like the general market in how its breaking down below the 200 DMA. The 68 level should be good support.
TBT (Ultrashort Lehman 20+ Year Treasuries) The 58.80 area could be good support based on it being a significant low in May 2012.
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 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:
COG - Must be over PDH at 48.36 with risk under today's low of 47.38
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:
ARMH - Prefer to enter over FTP at 34.25 Max risk 33.70
NFLX - Broke out of the two week consolidation. 81.00 should be support. Max risk 79.50
SWN - inside day, max risk is today's low at 34.62.
QCOM - inside day and negative pivots so longs must be above the FTP at 61.93
EQT - must be over 60.00 Max risk 59.50
GGC - must be over 40.00, max risk 39.00
DVA - must be over 112.40, max risk 111.60.
EOG - must be over 114.10, max risk 113.00
XRAY- inside day, must clear 38.50
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:
DDS - needs to clear 83.66
Phase Changes: N/A
Others to watch
BIIB - Must be over 136, max risk 135.50
Shorts:
Category 5: Titanic - Bear Phase, Negative pivots, not oversold, Risk R1 or previous day high. Target: Day to swing
LULU - must be below 66.70
UTX - must be below 75.35
CIT - prefer to wait for a break below 36
RL - must be below 151.25
JOY - must be below 56.20
COH - must be below 52.20
CLF - prefer to wait for a break of 34.79
NOV - inside day, must break 69.57
Best wishes for your trading,
Geoff Bysshe
