Prepared by Geoff Bysshe, President of MarketGauge, filling in for Mish for Until December 13th.
"Beware of profit taking" was my closing sentence yesterday and today it's where I start in preparation for tomorrow.
The Fed had a lot to say today, both in its policy statement, and in Mr. Bernanke's incredibly long press conference. The media described the day as the market reacting positively to the Fed policy statement only to be disappointed (or confused) by Mr. Bernanke's Q&A session later in the day. I disagree. The rally after the 12:30 policy statement was narrow in breadth and most likely would not have held up if there had not been a press conference later in the day.
The intra-day "round trip" pattern as I like to call it (a strong rally that rolls over and returns back to the lows of the day) is indicative of at least a short-term topping area. So look out for more profit taking tomorrow.
S&P 500 (SPY) Trend line from the September highs is the key hurdle. It needs a rest. 143 is support Subs: Positive Pivots
Russell 2000 (IWM) Engulfing pattern suggests it is not ready to breakout and run quite yet. 82.75 is the key support level I mentioned yesterday and remains so with todays low at 85.77. Subs: Pivots Negative
Dow (DIA) I'll repeat yesterday's comments. Unless there is a news catalyst it could be a good time for a rest against the 133 area. If the market sells off look for it to hold 1341.60 Subs: Pivots Positive
NASDAQ 100 (QQQ) Even with all the excitement around the Fed, this ended the day with an inside day. Must hold Tuesday's lows 65.51. Subs: Pivots Negative
GLD Mixed feelings here. It's holding 165 but today's action was not what I'd expect given the Fed's news. It should have held onto its rally like the TLT's closing at their lows. As a result, it looks very bearish if it breaks 165 and I don't have any confidence in its upside.
SLV Acted as GLD should have. This is the one to watch on the upside. I prefer both it and GLD to be moving in the same direction of my trade so a long is a little too speculative unless GLD gets moving on the upside. However, an OR breakout with a stop below 32 may be worth a try tomorrow if it happens.
XLF (Financials) Broke the 16.20 resistance on the Fed news but it put in a round trip and closed with a doji (undecided). Look consolidation with support at 15.92 on the downside.
IBB (Biotechnology) Closed down, but held key level of 140.30. As subs in the trading room know, I'm long with a stop below 139.60. Watch out for 143.60 on the upside.
SMH (Semiconductors) As mentioned yesterday - 33.30 area could be significant resistance. That was today's highs and remains good resistance. Look for support at 32.65 and 32.40.
XRT (Retail) Still struggling at the 50 DMA. Has potential to go either way, but today's action was negative.
IYT (Transportation) Outside day closing near the lows is negative. Below 92 this is a good short candidate in a weak market.
IYR (Real Estate) Look for 64.90 on the upside with support at 64.15.
XLI (Industrial Spdr Fund) 37.40 should be good support, and resistance is 38.12.
OIH (Oil Services) The daily is very compressed. It could go either way big. Under 38.50 it is very vulnerable.
XLE (Energy) Subs: Confirmed bull phase. Must hold 71.60, next support is in the 70.40 area.
TBT (Ultrashort Lehman 20+ Year Treasuries) Big day today in the exact opposite direction of what the Fed wants to see. The TLT (the TBT's underlying inverse) is at the 200 DMA and the trend line from the Sept. lows. TBT's are crossing the 50 and the trend line from the Sept. highs. This is major inflection point.
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: (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:
MCO 5 days of tight consolidation and now an inside day. Key levels to break are 49.66, 49.74 and then 50.00
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:
CNI Must clear 91.50. Max risk 91.00
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:
LULU Must be over 73.70
WHR Prefer and OR Reversal with 100.30 in my stop. Look for support at 100.50
AMT Look for support at 76.00 and 75.60 areas.
C Prefer entry to be over the FTP of 37.50
CB Prefer entry to by over the FTP at 77.66
EV Needs to break 31.50
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:
Phase Change: N/A
Category 5: Titanic-Bear Phase, Negative pivots, not oversold, Risk R1 or previous day high. Target: Day to swing
AGU Must be below 100.00
MJN Prefer an OR reversal against FTP area at 66.20 or prior day low at 66.38.
ROSE Inside day and positive pivots. Prefer to enter below today's low of 43.18
TSCO Must be below R1 at 86.50. Good candidate for OR breakdown below today's low of 84.90
AOL Prefer entry to be below 31.00
NSC Inside day. This could go either way
RL look for resistance at 151.25. Max risk 153.50
YOKU Inside day at the 10 DMA. Must be below 15.35
Best wishes for your trading,
Filling in for...