EGG Scan for August 7th

Choppy markets remained despite some positive returns on the day. From my perspective we failed to gain any clarity and if anything the earnings and merger cancellations were more of a negative than portrayed by the indexes. The issues with the Russia/Ukraine disagreement was still in motion, but less reaction from US markets and more reaction to the Russian markets (RBL) on the day. Interest rates calmed after a negative start. Gold bounced on inflation fears. Oil prices rose to start the day, but failed to hold following the speculation on Russia and Ukraine. This choppy market place 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 we do our best to avoid such posts. Thus we remain patient and watch to see how this unfolds going forward.

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

Gold (GLD) gained 1.5% on the day as the inflation talk gains momentum. The point revolves around the Fed acting too late relative to interest rates and stimulus. Jury still out on that speculation, but could be worth trading short term.

Gold miners (NUGT) the bump in gold prices today help the miners move to the top spot on the day. I like this trade better if gold prices are going to hold up. Again this is speculation and the trading range is well establishe over the last four weeks with the uncertainty about the outlook for gold prices. (Silver dumped lower on Tuesday and it could get interesting if the price of gold holds up.)

Russia (RUSS) short was the big trade again today as news and rumors continued relative to the Ukraine. The ETF is now above the 200 DMA and ready to move higher. This is a news driven event and has to be treated as such.

Coffee (JO) remains volatile, but made a nice move higher on the day. I still like the upside and the outlook for the price of the commodity short term.

China (FXP) the short China ETF produced a nice move on the day as the Chinese markets followed through on the downside. I would exercise some patience and confirm the downside risk before jumping on the negative side of this trade.

Natural Gas (UNG) reversed the consolidation at the bottom of the selling in the commodity. I do like the upside trade on a reversal if the price of the commodity can gain some confidence.

Still Watching: 

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 with a follow through 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) two days of selling takes out the support at the $40.30 mark. Flag pattern breaks lower, but not much conviction in the selling. 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.

Small Caps (IWM) the short interest rose last week and the ETF tested the $110 support level on Friday. Monday the ETF moved to $111.66 and it closed at $111.38 Tuesday and $11.73 Wednesday after a move above the $112 level intraday. Watching for a possible reversal to lead the broad indexes higher, but that has not materialized yet. The good news is it has not sold lower either. 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. $17.56 is support and watching to see how it holds near term. A break below would be the exit point.

On the Downside:

Real Estate (DRN) rolling top pattern broke and tested lower and testing 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. SRS is the short ETF for the sector.

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 (short ETF) broke higher as a result, but no volume to speak of to trade it. Dec Puts on XLU would be best way to trade the downside. Took the short trade today on XLU as the downside accelerated through the 200 DMA.

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 broke the 200 DMA and is in position to continue the downside move. $97.45 support broke today with close at $96.86 and could push to the next support at $95.

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:

Direction is still like a yo-yo and without some clarity it is a challenge to put money at risk on speculation versus high probability trades.¬†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 which didn’t happen with the positive reversal off the open. Patience here as we¬†let this unfold. The lack of clarity is keeping the volatility up and the outlook scrambled. We will make decisions in the am…¬†patience.