EGG Scan for August 18th

Friday gets disrupted by the Russia/Ukraine conflict and resets some charts. The recovery into the close was a positive, but it did leave plenty of questions on how the markets will respond if the conflict escalates and what is the impact to bond yields?  With that in mind running the EGG scan was interesting to see what showed leadership going forward.

Treasury bonds were one of the key assets to show up again on the scans. When bonds show up in momentum scans you have to take notice at least for the short term outlook.

Short Russia ETF popped again towards the top of the list, but that is news driven and very speculative relative to trading any positions.

Bottom line… one day at a time. The opportunities are unfolding we just have to be willing¬†to take the risk necessary to capitalize on the moves.

Running the EGG Scans¬†– First the daily winners…

The ride we discussed on Thursday was worse on Friday. The news injection into the trading day created plenty of emotions for traders and triggered stops early in the trading day only to see some of them bounce back after the dust settled. Again, this is a good time to patient and let the volatility settle and some clarity be gained before putting money at risk in a news driven market.

Biotech (BIB) the fund showed up again as one the top positions on the day up 1.8%. The challenge cam with the sell off on the Russia news dropping more than 3% on the swing lower, but recovered into the afternoon to end higher.  We closed back above the $95 level to clear resistance on the move back towards the June high. We considered this for the EGG trade, but the gap open took away any interest. Buying into the news would have taken speculation and that does not fall into the strategies parameters.

Coffee (JO) was back on the scan list with another bounce off support test. For those who can stomach the volatility of the ride I like it looking longer term.

 

Pharmaceutical (PJP) followed through again on the upside for the third straight day. The reversal of the downtrend (micro) was positive and closed back above the 50 DMA.  That is helping lift the healthcare sector (XLV) overall as well. Solid leadership in the sector and worth watching as well.

30 Year Treasury Bonds (TLT) showed in the top of the leadership scans. Broke to a new 12 month high and doesn’t show signs of selling lower near term. Interest rate hike worries are being put on the back burner and demand for treasury bonds is rising. Still believe that if and when rates turn¬†higher, despite the move lower¬†last week, the downside risk in bonds is large. Patience and watching as it unfolds is my trade of choice in this sector.

Energy MLPs (AMJ) are getting a boost from the Kinder Morgan news earlier in the week as the upside continues despite the price of oil. FEI was one the individual leaders in the sector.

Mixed day with negative overtones. That combination does not make for a good trading environment. Patience remains the key to define any ownership going forward.

Still Watching: 

Gold miners (NUGT) enjoyed the bump in gold prices that helped the miners move higher. The stocks did well to start the week, but declined more than 6% the last two days. Gold prices have moved lower and failed to break through resistance. Watch and see what unfolds.

Volatility index is back in the news and moved to 15 early and close at 13.1 by the end of the day. Watching to determine which side is best.

Treasury bonds regained loses from Tuesday and hit new 12 month high on Thursday. The yields fell back to 3.13% and testing lower. TLT moved¬†above¬†the¬†key resistance point near the $116 mark and holding. I still believe this is fear motivated by investors. But, it also is getting rotation from the global markets looking for safety in light of the geopolitical issues. Whatever is driving rates lower… there are plenty of analyst and investors scratching their collective heads.

China (FXI or YINN) Bounced off the low and made move to new high and tested lower today down 1%. Again I refer you to the carnival ride above. I like the longer term view of the country ETF, but you need to have a strong stomach to endure the ride.

Social Media (SOCL) cup and handle breakout still in play. Moved above $20.11 and held on in the storm of ups and downs. Managing the risk of ownership in the models, and looking for enough momentum to make a trade.

Current EGG:

Bounce remains in play and as we stated we were watching to see if the upside resumed. I cannot say that is true based on the response to the news of Russia. The uncertainty factor is keeping me on the sidelines as the day to day movement does not fit in with the EGG Scans. Thus we are practicing patience and caution. It is easier to make up for lost opportunities than to regain lost principle.  I term this undue risk we will continue to be patient and let this short term volatility play out.