EGG Scan for August 5th

Slow volume day with modest bounce off the lows does little to influence the scans for the EGG today. No economic data, little happening on the geopolitical front, global markets were positive, basically it was quiet day that allowed the buyers in the afternoon to push stocks higher. We will see how this plays out tomorrow with a resumption of economic data and other issues. One day at a time. I am not making much of the low volume bounce until we see evidence the sellers are back in hibernation.

Running the EGG Scans – First the daily winners…

Short Oil (DTO) reverse head-and-shoulder pattern in play and the break above $31.20 put the upside in play for the short fund. Today the bounce in crude erased some of the gains, but the downside is still in control for the commodity. USO held the 200 DMA and needs follow through if we are going to put in a possible bottom reversal.

Volatility Index (VIX) jumped to 17.5 Friday, but fell to 15.1 on the close today. We still have to watch for the upside in the VIX if nerves stay in play, but the move lower took some wind out of the sails. SVXY was posted in the pattern trades list this morning and hit entry for a nice gain on the day. Watch to see how the upside of the VIX plays tomorrow.

Emerging Markets (EDC or EEM) bounced back from the selling and followed through on Friday’s move. Long term trade if you are willing to manage the volatility of the trade .Otherwise trade opportunity for 2-3% on the upside if the positive outlook remains.

Small Caps (IWM) short interest rose last week last the ETF tested the $110 support level on Friday. Early test today, but the upside  moved to $111.66 on the close. Watching for a possible reversal to lead the broad indexes higher or continues the downside to lead them lower. Downside in play currently.

Base Metals (DBB) bounced back today with a solid 2.2% gain. Closed back near the previous high at $18. Steel is pushing the sector higher and copper is giving a small assist. Copper (JJC) helped today, but still consolidating in a wedge pattern short term.

Still Watching: 

Real Estate (DRN) rolling top pattern broke and tested lower and support near the 50 DMA. 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. Short side is definitely a trade possibility with a break of support.

Utilities (XLU) still showing weakness and tested the 200 DMA. Four days of selling and we broke 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.

Treasury bonds have continued to move higher as rates have fallen. Is there change currently relative to the Fed stimulus cuts and the rumored interest rate hikes? TBT hit entry at $59.60 and you have to measure the risk and deal with the volatility in the trade.

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 tested the break higher today. Still like the longer term upside as the opportunity, but you will need to deal with the volatility of the commodity short term.

China (FXI or YINN) moves higher on Monday and is back near the previous high. The upside remains positive and we may look at adding the position back based on the resilience in the country short term.  Watch for the next opportunity in the country ETF if the upside remains in play.

Emerging Markets (EDC or EEM) – we got the break higher last week in the sector and we again gave up the gains with Argentina is weighing on the sector as they default on bonds. Broke the $44.25 support and hit stops Thursday. Bouncing back now and above the entry point again? Patience.

Base metals (DBB) still gaining in the uptrend and bounced nicely today following last weeks test. Hold and manage stops. Watching to see how this unfolds. I still like the upside here.

FDN and SOCL both held up well during the test and remained in their respective consolidation range. They are in position to break higher and run if the broad markets can hold the trend on the upside. Looking at both as potential play for the EGG based on the momentum.

On the Downside:

Short Crude Oil (SCO) See Above notes.

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) See Above notes.

Euro has been dropping on speculation surrounding Russian sanctions. Attempted to find low here near term. Watch to see if the upside follows through or the dollar exerts the upside again. EUO is the trade if downside accelerates.

Semiconductors (SMH or SOXL) fell below the 50 DMA, but attempted a reversal today avoiding more downside movement 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 last week on the move. I am watching how the large cap index responds to the bounce higher today. If there is follow through we will have to exit our short trades on the index. More downside will bring the trendline into play as well.

Russia (RUSS) continues to find selling points as the issue with Ukraine continues. It was quiet today and the buyers pushed RBL higher. The sanctions are adding to the pressure on the country ETF. Favoring the downside on the action.

Current EGG:

Short trade opportunities stall on the bounce today… FDN and SOCL are showing positive moves in the sectors. I will decide in the AM if they make sense relative to the risk looking forward. With the chop still in play the best course of action is to be patient and let the trends all develop.