EGG Scan for August 19th

Markets start the week with solid gains in transports, retail, industrials and small caps. Despite all the continued warnings from analyst about the valuations assigned to stocks currently the buyers continued to add to positions. There were rumors this weekend that institutions were selling and the sideline investors were doing the buying putting money markets into stocks. If that is true that would be the final stage of the uptrend as the stupid money goes to work. There are plenty of things to like technically about the move off the low on August 7th, but there are equally things not to like and that is dividing investors.

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…

Solid start to the week, but again on low volume.

India (INDA) moved back to the top of the channel or trading range. Look for a move above $30.90 mark for the ETF. Emerging markets are coming to life slowly. VNM breaking above $22 and looks interesting in the sector as well. ILF broke from the consolidation and back towards the July high.

Small caps (IWM) were up 1.4% and cleared the 1150 resistance on the Russell 2000 index. The laggard sector has been holding the growth story down and now look for follow through and some upside movement in growth stocks overall. Patience as this unfolds, but there is an opportunity here.

Software (IGV) posted a solid gain for the technology sector. The internet (FDN) was up as well to help the sector maintain the positive move higher from last week.

Industrials (XLI) posted solid bounce as well with a ‘V’ bottom recovery. Watch the 200 DMA as resistance and move higher would be worth a trade on the upside move.

REITs (IYR) moved above the previous high in July and holding the uptrend from the December 2013 lows. The sector has been following the lead of the thirty-year bond on the upside. The decline in interest rates has been a natural catalyst for the REITs to recover from the big drop in 2013. It is a good trade short term, but the upside longer term is challenging and need to protect the downside with stops.

Biotech (IBB) the fund showed up again on the scan list as the sector has been and remains one of the primary leaders. Looking for a move above $266.50 to continue the upside move and challenge the March highs.

Russia (RBL) was up 1.9% as the rumors are now on the peace side. That puts a ‘V’ bottom pattern in play and a upside trade if the rumors are true. Worth trading with tight stops if you are willing to accept the risk of the trade.

Still Watching: 

Coffee (JO) held steady Monday after the bounce off the support short term. 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.

Emerging markets are still in play with VNM, FXI and others breaking higher. Whole is easier to trade than the parts, but there are parts worth digging in and finding the movers.

Retail (XRT) jumped 1.6% and held support at the $83.75 mark. Dollar General got a higher bid from Family Dollar to trump the bid from Dollar Tree to purchase the company. AEO and JCP both were up nearly 4% on the day to lead the sector as well. Despite the warning and lack of sales growth investors still want to believe in the upside of the sector. Technically interesting, fundamentally not convinced. That makes this a trading sector versus holding longer term.

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.

Treasury bonds experienced some selling on the day as TLT closed off 1%. The yields rose back to 3.19% and bounced off the low from Friday. 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 back near the previous high currently. I still 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 gained some price momentum on the day, but the volume remains a primary concern and question market. It is summer, but still a bit of an issue for the equity markets. Watch TBT for reversal trade on interest rates making an upside appearance short term. $56.90 is the level to watch for trade opportunity.

Biotech settled in today again following the selling on Friday. $157.60 upside trade is attractive as well with the current momentum in the sector.

Watch AM post for what will set up best for the trading day.