The bottom test late last Thursday started the reversal or bounce off the key support at 1900 on the S&P 500 index. The big question is how high does it bounce? The gain of nearly 2% off the lows is now the 1938 level which for now is a testing point for the move off the low. Oversold conditions created the bounce, but it will need a catalyst to follow through on the upside. No war between Russia and Ukraine would be a new driven catalyst or strong economic data the balance of the week would be a catalyst or strong retail earnings data would be a potential catalyst… equally the opposite of the those issues would act as a downside catalyst. Thus, we remain patient and let it all unfold one day at a time.
There are plenty of data points the balance of the week that can offer a turning point for the broad indexes and the various sectors. Retail sales on Wednesday tops my list to take the temperature of the consumer. Earnings from the sector have been coming out and while mixed, they have offered some bright spots. The consumer is lethargic much like the economy. They need confidence to spend and the current worries are keeping them from shifting gears aggressively. XRT, SPDR S&P Retail ETF moved above $85 resistance on Monday and that could reverse the short term downtrend in play.
Watch, respond with a disciplined strategy, and keep your focus moving forward. You can only go forward.
Running the EGG Scans – First the daily winners…
The shift on Friday and Monday’s trading puts the upside back in play short term. The negative or inverse ETFs have retreated for now.
Coffee (JO) after selling back near support at $34.35 we the ETF bounced 4.8% today. As we stated last week a trade for those who can stomach volatility. I like the longer term upside, but it will swing up and down along the way.
China (YINN) back on the upswing follow a test lower. Again a longer term view is needed and acceptance of the volatility.
Emerging Markets (EEM) also reversed on the selling and looking to move back above the $33 mark short term.
MLP ETN (AMJ) jumped on the Kinder Morgan announcement. Positive, but news driven. Watch to see how it unfolds moving forward.
Social Media (SOCL) cup and handle breakout still in play. Moved above $20.11 on the day and need confirmation tomorrow to follow through.
Plenty of global or country ETFs moving on Russia and Iraq data along with the MLPs jumping on the energy MLP Kinder Morgan news. Bounce day to start the week and now we watch to see how it unfolds going forward. Up or down is the million dollar question… the one dollar answer for now is sideways.
Gold miners (NUGT) the bump in gold prices has helped the miners move higher. The stocks did well on Monday, but still nee to deal with the upside conviction if we are going to make any real progress. This is like gold, in need of an upside pop to take the miners higher from the consolidation and trading range.
Volatility index is back on the downside and testing support at 14. Is the worst of the storm over and the bias back on the upside now? Time will was controlled by the buyers and SVXY was up 4.1%.
Natural gas (UNG) move on the upside last week and is forming a cup bottom. Move above $21.50 was the first part of the reversal from the selling and now lookin for the follow through.
Treasury bonds have continued to move higher as rates have fallen, but back at the key resistance point for TLT. If there is a clean break above the $116 level that would have rates moving lower. I still believe this is fear motivated by investors in the US over the selling last week. But, it also is getting rotation from the global markets looking for safety in light of the geopolitical issues. If both calm rates should rise again. But, like any speculation you watch and let it unfold or validate your belief.
Coffee (JO) moved above $35 and then tested the move last week. Back on the upswing Monday and I still like the longer term view. The commodity is getting pressure from the price of coffee both short and long term. Based on analyst and projections 2015 could experience some shortages or lower production. Not for the weak at heart and needs a longer term focus.
China (FXI or YINN) two days of selling takes out the support at the $40.30 mark , but it has recovered nicely the last two days of trading. The upside remains positive and we are adding the position back based on the resilience in the country short term. Watch for the next opportunity in the country ETF if the upside remains in play.
Small Caps (IWM) the short interest rose last week and the ETF tested the $110 support level. It has been volatile intraday, but managed to break back above the $112.50 level in trading today. ONLY ETF model added a position in the index and so far the trade is playing out. Watch as the downtrend is still in play until we follow through on the move of support.
Base Metals (DBB) is testing the move higher. $17.50 support is attempting to hold on the test. The metals have been bouncing along with the broad market uncertainty. Still holding the highs and watching for a resolution on direction. A break support on the close would be the exit point.
On the Downside:
Watching the current reversal or bounce in play. We ran the negative scans for today and only 4 showed up. Friday got similar result. The selling from last week still shows on the charts clearly and there has not been enough upside move to eliminate the possibility of a change in short term direction. One day at a time is all we can do for now.
Friday’s bounce produced a follow through today and that puts the positive trades back in the scans. There were some nice bounce moves, but we will want to see some clearer data to take the swing trades or opportunities looking forward. Watch for further data on this in the morning on the table.