EGG Scan for July 23rd

Upside returns to the broad markets as investor anxiety calms over the geopolitical risk around the world. They are not resolved, but they are on the back burner for now. Economic data was positive to start the day off on the right foot and positive earnings set the early tone. The chop is still in play and the scans continue to reflect just that relative to leaders and laggards, patience is the name of the game for now.

The volatility index (VIX) fell back near 12 showing the erosion of anxiety. The SVXY trade was back today with an entry near the $88 level as posted this morning. Move stop to $86 and see how it opens in the morning.

Country ETFs have been rising up the ladder as we discussed on Monday. The breaks higher from Brazil (EWZ), Thailand (THD) and Indonesia (EIDO) also making solid moves. China (FXI) joined with a jump of 2% on the day. INDA, South Africa (EZA), Emerging Markets (EEM) and Turkey (TUR) all posted solid moves higher as well.

Base metals (DBB) added to the upside again today with a 1% gain and continues in a solid uptrend.

It is a good time to be patient and let the noise filter and the charts settle as the anxiety creates disruptions in the trading. Trends are better trading partners than volatility… at least from my perspective. Some growth sectors coming back following the selling. Don’t read too much into the activity and let it continue to unfold and confidence build if the upside is going to materialize.

Running the EGG Scans – First the daily winners…

China (FXI or YINN) makes the upside move we have been watching the last week. This was positive for the country and we will monitor the gains going forward.

Emerging Markets (EDC or EEM) – Again we get the break higher in the sector and we need to hold this time around. Watching how this unfolds tomorrow. The BRICS banks is helping the sector gain confidence.

Semiconductors (SMH or SOXL) continue to be one of the key leaders for the broad markets. Watch for the upside breakout to follow through and potentially take a trade.

DGAZ – short natural gas is running higher on the downside slide in prices. The build in supply has not helped the outlook at all. The worries of over supply are building and that is what sent prices down near the $3 level last time.

Solar (TAN) – making a bounce after the selling and pushing back towards the previous highs. Worth tracking to find the leaders short term. SolarCity (SCTY) made nice reversal and push back towards the $73 target. SunPower (SPWR) is in position to trade back to the previous high of $42 as well. Watch for follow through to the move today.

Patience as we let some of the chop work out of the market short term.

Current EGG:

We posted China (FXI) as the EGG potential last week. We gapped higher, tested, but held the move higher. With the test on Thursday we added the trade and held into the weekend with the bounce back on Friday. I still like this trade looking into the week and we will manage our position and our risk accordingly. The move higher finally materialized today with a gain of 2%. Stay focused and manage your risk on this trade short term.