The sellers were in control today and they never looked back from the opening bell. This has been building over the last week as we have discussed the good economic news on Wednesday was too much reality for investors. The fear factor relative to the Fed hiking interest rates sooner than originally thought played havoc with investor psyche today. In the end it was an ugly day as the major indexes turned in a negative month thanks to the losses today.
We have been discussing the negative sentiment building in the sector below and they all played out today as the sellers took control. That shifts the scans considerably today and we will have to see how it opens tomorrow relative the direction and sentiment shift. Plenty of technical damage done in the market across the board and the move below the 50 DMA on the S&P 500 index is a negative and puts the index into a distribution phase.
The media circus was in full operation today with the doomsayers everywhere. I am the first to admit it was ugly today, but where we go from here is still a guessing game for analyst. I do know that the reversal and break of near term support on higher volume is not a good sign short term. We still need to remain patient and watch patiently for the indicators to confirm the downside if that continues or a reversal if the buyers are still willing to buy the dip.
Running the EGG Scans – First the daily winners…
Short Oil (DTO) reverse head-and-shoulder pattern in play and break above $31.20 puts the break higher in play. Worth trading if this negative momentum in oil accelerates. (This was one of the leaders on Wednesday and we did get the follow through break higher.) $31.25 entry on DTO.
Volatility Index (VXX) jumped 8.3% on the day. The lethargy is officially gone? This can reverse as easily as it rises day to day, but today’s selling made an impact. If the jobs report if better tomorrow watch for the index to rise again as the worry over interest rates will move higher.
Coffee (JO) as we discussed has been moving higher since the Starbucks conference call on the company hedging cost into 2015. Upside has played out nicely. We added this to the pattern breakout list earlier this week and today was a nice pop of 7.3% to add to the gains.
Small Caps (TZA) short interest rose and the short fund was up nearly 7% as the index fell 2.3% on the day and confirmed the downside move.
Financials (FAZ) short interest rose as the short fund was up 5.6% as the sector declined 2% on the day. This is a breakout for the short ETF on more than twice the normal volume.
Short ETFs set the pace on the day as expected with the accelerates selling. Watching to see how tomorrow unfolds with some positive earnings after hours.
Real Estate (DRN) rolling top pattern setting up on the ETF. I am not ready to say sell, but it is on my watch list for rising risk. Interest rates on the upside Wednesday didn’t help. Thursday was worse with a 4.4% decline and stops were hit based on our exit points. Rising rates are putting pressure on the sector near term.
Utilities (XLU) so much for the positive bounce on Monday! Three days of selling and we are pushing break the $41.50 support level. Short side is building interest as the downside take root. SDP broke higher as a result. no volume to speak of.
Gold miners were higher on Friday and Monday. Still in consolidation pattern, but watching to see if there is any follow through going forward. Moved to the bottom end of range and testing a key support level at the $25.90 mark. Gold lost 1.1% on Thursday and now testing support at the $123.90 level today.
Treasury bonds continue to have defensive momentum to them from money rotating to safety. Wednesday was the first big bounce in the yield we have seen in several weeks. Followed through on Thursday with more selling as interest rates rise again. TBT hit entry at $59.60 and you have to measure the risk.
Coffee (JO) is moving off the lows and I like the upside opportunity in the commodity on the speculation around the rising cost based on supply and demand. $34.20 entry point and still rising. Posted to the Pattern Trade List.
China (FXI or YINN) moves lower on Wednesday and Thursday. There is speculation about believing China’s data points, but that has been the easy excuse to not believe in the upside produced in the stocks. The upside move through the resistance level at $40.25. January 2013 high is the next resistance point ($40.95) of which we hit resistance and now testing the $40.25 breakout point. Watch for the next opportunity in the country ETF on the upside still.
Emerging Markets (EDC or EEM) – we got the break higher last week in the sector and we held the move this time around with a nice move on higher. Argentina is weighing on the sector as the threat of default on bonds is in play and that accelerated on Thursday with the default. Broke the $44.25 support and hit stops. Watching for this to bounce back.
Base metals (DBB) still gaining in the uptrend, but now testing near the highs the last couple of days. Hold and managing stops. Watching to see how this unfolds. I still like the upside here.
On the Downside:
Short Crude Oil (SCO) was up again as crude is now testing $98.80 level with the move below $100 and the 200 DMA. The downside in crude continues to build some intermediate term interest. The demand has not materialized to the level some were expecting, but it has increased. Some downside will flush out the excess speculation and then give the commodity some direction.
Natural Gas (UNG) still testing support near the $20.75 level and if a bounce starts that could set up a trade opportunity. Looking for a move above $21.40 if we are going to trade a potential trend reversal on the move. The short side stops should be real tight at this point.
Small Caps (IWM) broke the $112.20 support and put the TZA fund in play with an entry at $15.85. Watch as the downside leadership has started with this sector.
Euro has been dropping on speculation surrounding Russian sanctions. Another downside move in the euro on Wednesday keeps the downtrend alive. EUO is the trade if this accelerates.
Semiconductors (SMH or SOXL) fell below the 50 DMA, but attempted a reversal which failed today with more downside movement in place for semis. The missed earnings have carried some weight pushing the sector lower. Watch how this plays out as it is a key sector to the markets health. Short trades are still the trade of choice until we have a confirmed bottom reversal. $48.50 key support for the sector.
NASDAQ 100 index (QQQ) broke the $96 level of support and added QID today on the move. I am watching how the large cap index responds with the LinkedIn earnings beating expectations tonight. This has been the overall leadership for the markets on the move higher, but is showing signs of topping technically. More downside will bring the trendline into play as well.
Russia (RUSS) continues to find selling points as the issue with Ukraine continues. The sanctions are adding to the selling this week and the next resistance point is $14 on the short ETF. Big decline on Wednesday and back higher on Thursday, but Russia is still a downside play without some resolution in Ukraine.
I was looking at QID this morning for the EGG from the scans, but wanted to see how it played out today. Got my answer. Still looking at adding a downside play on this break lower today. More in the AM after we run more scans. The results will be posted to the table.