EGG Scan for August 6th

Choppy markets create the challenge of clarity in the charts, clarity in the future outlook and the unwillingness to take on undue risk. The selling on the day was credited to the worries over the Fed hiking interest rates to start the day, but then there was the Russia/Ukraine issue that sent the market lower in the afternoon and yields back to their previous lows. Fear trumps interest rate worries. However, as we have seen in the past, fear dissipates and optimism replaces it in time. The interest rate worries will persist and have a high probability of taking place sooner than later. This is creating a choppy market place and keeps us from taking a EGG trade that may only work for one day. The scans and model are not designed for day trading and will avoid such posts. Thus we will remain patient for now and see how this unfolds going forward.

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

The VIX index (VXX) or some leveraged version of the ETF was the clear winner on the day. Yesterday SVXY (short VIX) ETF was the winner on the upside as some positive sentiment slipped in for the day. Today VXX (long VIX) was the winner as the index spiked higher on the early selling. Day trading the VIX has been profitable for those willing to take the ride.

Russia (RUSS) short was the big trade today as well on the news. The ETF is now sitting at the 200 DMA and ready to move higher. This is a news driven event and has to be treated as such.

Energy (ERY) short ETF was another leader on the day as the sector dropped more than it gained on Monday. The next support level is close and a break will only accelerate the selling in one of the previous leaders.

Semiconductors (SOXS) short ETF was a leader as well with the sector leading the technology stocks lower. INTC was off 3.6% on the day leading the downside for the sector. Social media (SOCL) was weak in the technology space as well. This downside acceleration on Tuesday will have to be watched and confirm direction. Short trades are picking up momentum.

Financials (FAZ) short ETF shows the continued weakness in the banks and their outlook for profit. Watching the downside support levels and if they break this short trade would be of interest going forward.

Still Watching: 

Real Estate (DRN) rolling top pattern broke and tested lower and support near the $58.50 mark. This is setting up the sell signal should it break lower. The uptrend line is being challenged and there is plenty to deal with short term. 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. Five 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. Dec Puts on XLU would be best way to trade the downside.

Treasury bonds have continued to move higher as rates have fallen. Watching for 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. Each step that takes the bonds lower, fear drives them higher again. short trades have to be looked at long term. TBF is the non-leveraged ETF for shorting the long bond.

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 lower on Tuesday. Flag pattern setting up as the uptrend test short term on news.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.

Short Oil (DTO) reversed the positive gain from Monday in oil as the downside returned. There is a head-and-shoulder pattern in play and the break above $31.20 put the upside in play for the short fund. USO held the 200 DMA and is in position to continue the downside move. $97.45 is the support currently for crude a break and the short side accelerates.

Small Caps (IWM) the short interest rose last week last the ETF tested the $110 support level on Friday. Monday the ETF moved to $111.66 and it closed at $11.38 today. Much less response than the balance of the market. Watching for a possible reversal to lead the broad indexes higher if there is a reversal move. Downside in play currently and watching.

Base Metals (DBB) is developing a trading range with the bouncing around in the metals currently. Still holding in the newly established range and watching for a resolution on direction. Steel is pushing the sector higher and copper has been giving a small assist, but lost ground today. Copper (JJC) is still consolidating in a wedge pattern short term.

On the Downside:

Short Crude Oil (SCO) See Above notes.

Emerging Markets (EDC or EEM) Рwe got the break higher last week in the sector and we again gave up the gains with Argentina weighing on the sector as they default on bonds. Broke the $44.25 support and hit stops Thursday. Selling on Tuesday gets our interest on the downside with a break of the $43.50 level. EEV is the short ETF for emerging markets $17.35 is the level of entry to watch.

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 if not hit on Tuesday. Break above $21.50 could be entry for long position.

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. Broke support on Tuesday and short trade on semi’s in order.

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 current selling. The downside is in play, but watch for any reversal signs if the buyers return.

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 stalled on the bounce¬†Monday… they returned on Tuesday. Choppy, Choppy, Choppy. Break of support level on the S&P 500 index helps to set up the short trades, but need to confirm the downside is in play for a further decline in the major indexes. Patience here as we don’t want to day trade or guess/speculate on direction. The lack of clarity is keeping the volatility up and the outlook scrambled. We will make decisions in the am… Short SMH is attractive with the break of support.