EGG Scan for August 22nd

S&P 500 index hits new high on the day. At least that is the exciting headline across the media. It does set up a nice ‘V’ bottom reversal for the index and erases the downside off the August 7th low. The cautious nature has kept us from putting money in an EGG trade. The speculation was too high and the scan never really solidified clarity on the move. Volume has one of the big issues relative to our discipline. I understand it is summer and the volume is muted, but this has been more than I am willing to ignore relative to the scans. After 30 plus years of this, I have learned one valuable lesson… follow your discipline even when it seems you should go against it. Sometimes the hindsight makes you question it, but it still is the prudent and right thing to do.

Tomorrow ends the trading week and we will see how it sets up looking forward.

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

Five solid days to the upside and nothing showing signs of selling… volume is the only challenge currently that worries me.

Financials (FAS) leader on the leveraged ETF, but XLF is pushing higher as well and broke above the previous high today. BAC news on settlement had a positive impact on the sector overall. Broke above resistance at the $104.07 level. Good volume and should be worth following the buyers tomorrow if it follows through.

Short Gold (DZZ) nice jump in the short ETFs as the price of gold tumbles on all the positive love around the economy, jobs and hope that is will work out without any hitch in the giddy up. Break above $6.53 is positive move for the short side ETF.

The balance of the scans show positive based on the leverage in the ETFs otherwise modest push to the upside. Some call this buyers fatigue and others overbought. I am going with five days on the upside without a test and the prudent buyers are watching to see how it unfolds near term. I would fall into the latter camp. I still don’t like risk or speculation I would have to take in this environment. I would have been right over the last five days, but it could have just as easily have gone the other direction. Still willing to be patient for now.

Below are from yesterday… they didn’t accelerate today, but then they didn’t fade either and worth continuing to watch going into tomorrows trading day.

Homebuilders (ITB) Bottom reversal cleared the $23.40 resistance and gapped higher on better than expected housing permits and starts report. Lower interest rates have helped as the sector recovers from the slow start this year. Looks ready to continue higher on the news.

Semiconductors (SOXL) moving back towards the July highs, but still some questions relative to analyst support for the group. I like the trade, but cautious of anything more at this point. entry at $113.50 is what I am watching tomorrow on follow through.

Small Cap (IWM) tested the move higher on Tuesday, closed below the 200 DMA and looking for the move through the $115.50 level for now. Stop has to be a move back below the 50 DMA on short term trade. Be patient and let it play out.

Natural Gas (UNG) showed positive gains on Tuesday and positive selling (DGAZ) on Wednesday. The lack of direction remains in the commodity, but the bottoming or base is still building. FCG, the natural gas ETF still showing positive towards the upside and is in position to break the downtrend line in play. Both need to trade together and both could offer opportunity.

ON THE REPORT THIS WEEK:

Energy (DIG) showing an ascending triangle pattern setup as the sector tested lower. Oil moved higher on the supply data and could act as catalyst on the upside. Watch to see how that story unfolds short term. TODAY: not breakout and we go to tomorrow.

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. TODAY: no break higher and we go to tomorrow.

Software (IGV) posted a solid gain for the technology sector and is breaking from a consolidation wedge or triangle. TODAY: Follow through on the $86.80 breakout and upside trade.

The internet (FDN) helping the technology sector maintain the positive move higher following the break from the wedge consolidation pattern. One of the key leaders for the sector and the broader index. TODAY: continued small consolidation move and watching for follow through on the upside.

Industrials (XLI) posted solid bounce as well with a ‘V’ bottom recovery. Moved through¬†the 200 DMA and facing¬†resistance at the $54.50 level. Volume questionable except for¬†one big spike . TODAY:¬†held it’s own¬†testing resistance. Scanning the sector for tradable ideas is worthwhile.

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. TODAY: tested¬†the move down 1%¬†and need some patience… tighten stops and see how it plays out from here.

Russia (RBL) peace rumors prevail for now taking the sector back towards the July high. 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. TODAY:¬†Held the¬†the move higher and stalled at the 50 and 200 Still need to move through resistance at the $24.85 level. Stop $24.15.

Current EGG:

Mostly positive day with modest gains across the indexes.¬†Yields moved lower after thinking about the Fed comments? Still watching the TBT trade possibility, but today didn’t help.

Energy is still attractive on a breakout trade.

A test would be ideal at this point to give direction on leadership.

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