EGG Scan for August 13th

Rally over? the bounce turned to selling as traders left with quick profits or investors sold into the bounce. The light volume and late day drift lower led to more selling today on light volume. It is end of summer blues, but the lack of direction is not improving. Looking at the broad market indexes we find the Small Caps (IWM) leading the downside on the day and erasing Monday’s gains. The consensus blame goes to Russia/Ukraine and Iraq. Neither really in the news today, but the headlines stated that investors were worried today. It was not the best of trading days, but then we have seen worse. The challenge remains clarity looking forward. Until that clears it will hard for the markets to find the upside support or momentum to change much from what is taking place now.

Nothing of note really changed during the trading day. The US markets continue be choppy as direction is defined. The bump higher in interest rates today was of some impact to bonds, but not enough to worry about. Europe remains a train wreck with IEV attempting to hold support at the $45 mark. Germany (EWG) and Italy (EWI) have been two major drags on the asset class. The mature global markets (EFA) continue to struggle overall. China (FXI) has been moving higher however as investors like the outlook near term. Thus, the emerging markets are still in a position to break higher if the geopolitical issues can be contained. Global bonds have calmed this week and we don’t see the downside escalating assuming no more defaults like Argentina. Commodities are mixed with gold being the latest to make an upside move along with the miners. Oil pushing lower along with the agriculture commodities. Last, but not least, the dollar remains positive and made a solid move on the upside. Overall not much is attracting money and the volatility is being stirred by the uncertainty.

Bottom line… one day at a time. The opportunities will unfold we just have to be prepared to capitalize.

Running the EGG Scans – First the daily winners…

Sellers return and the scans only turn up 25 positive opportunities and only seven of those were positive on the day.

Gold Minders (NUGT) the upside in gold early in the day prompted some buying in the stocks. Gold however, failed to hold the gains on the break above $126.50 and closed near the $126 level. The miners were up 1.6% on the day and broke from the consolidation range testing the previous highs.

Silver Miners (SIL) joining the upside gains and attempting to break from the current trading range. Still work to do, but the upside is in play for now.

Short Small Caps (TZA) The downside in the sector returned just one day after a solid move higher. It did hold support again, but the damage was interesting on Tuesday. Back to watching the downside break as a trade opportunity.

Short Energy (ERY) short energy was a leaders on the day as the price of crude falls back near the $97 mark today. Still no real conviction on the downside and more positives overall. That hasn’t helped push the stocks any higher.

Social Media (SOCL) cup and handle breakout still in play. Moved above $20.11 on the day and need confirmation for the follow through. Positive on negative day.

Inverse of yesterday and the move puts the stocks back in a negative mode. The key is to remain patient as we have stated no need to bang your head against the wall. Focus and let this all unfold.

Still Watching: 

Gold miners (NUGT) the bump in gold prices has helped the miners move higher. The stocks did well on Monday, but still need to deal with the upside conviction if we are going to make any real progress. Check! gained 5.1% on Tuesday and nice follow through on the upside. Got a pop and need to confirm the move.

Volatility index is back on the downside and testing support at 14. That was a nothing move for the index which despite the broad markets selling lower did nothing for the index. Still sitting on support at the 200 DMA. Watch to see how it does tomorrow.

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 looking for the follow through. No change on Tuesday.

Treasury bonds get a test with yields moving higher to 3.26% pushing the price of bond lower on the day. TLT failed again a the key resistance point near the $116 mark. 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. Tested lower on Tuesday, but as we stated that is the volatility of the fund. 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 couple 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 breaks above the $41 mark.

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 Monday. ONLY ETF model added a position in the index, but they struggled today on the downside. Watch as the downtrend is still in play until we follow through on the move of support.

On the Downside:

Plenty of activity today in the short ETFs. The move lower in the markets put them back in top today. Like everything else we have discussed today it is time to relax and let this all unfold. If the downside regains the upper hand and we break through the key support levels in the coming days these ETFs will be put into play.

Current EGG:

Bounce is not necessarily over, but some damage was done today. Watching to see how the trading resumes on Wednesday. The downside is back on the watch list and the upside shows some signs of life in sector specific ETFs. We are willing to remain patient for now and let the ups and downs play out.