Positive week of trading on low volume. My challenge remains the volume relative to our scan criteria. It has kept us from taking trades that have otherwise been positive. The question begs… why not adjust the volume part of the scan? For the simple reason I would be making an adjustment to force activity versus letting the strategy we have used for years successfully determine the outcome. Sometimes emotions get twisted into logic and it all sound good, but the reality is we have to follow our discipline not our emotions.
This week we are facing resistance on many of the key sectors. They need to break higher if we are going to keep this rally going. Be patient and let it develop.
Running the EGG Scans – First the daily winners…
Interesting scans with the short ETFs leading on a positive overall market day. This is something to watch as we start the trading week. Could be indicator of a test short term.
Russia Short (RUSS) the selling in the country ETF was profit taking heading into the weekend with talks in Germany on tap. Nothing happens over the week it will likely bounce back, but no one wanted bad news holding long positions… my guess.
Natural Gas Short (DGAZ) another reversal within the bottoming process for the commodity. The pattern is setting up for a directional break… it could be either way at this point, patience as it unfolds.
Energy Short (ERY) negative reaction in the stocks towards crude prices dropping and uncertainty relative to demand. It is still a supply/demand exercise within the sector after all the dust settles.
Treasury Bonds (TMF) the long bond bounced again towards new highs as yields fell again on worries over the outlook for the global markets and growth. Still only a trade on fear globally with tight stops on any positions.
ON THE REPORT THIS WEEK:
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: Need follow through on the break higher with some volume would be nice.
Software (IGV) posted a solid gain for the technology sector and is breaking from a consolidation wedge or triangle. Got the break higher on Friday hitting the entry point ($86.80) for trade. TODAY: Test of the move higher. Stop $87.
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: Look for move through resistance and scan for leading stocks in the sector to trade the breakout move.
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: Break through resistance. Scan the sector for leading stocks to trade on the move.
NO EGG in play currently. Watching for the break through key resistance as the trade opportunity this week.
Set up for Monday is the break through the resistance on the ‘V’ bottom reversal. Positive data in the sector has been the drive. Positive report last week for new home sales, pending and new starts. Looking for 2-5% move on the trade.