EGG Scans for May 16th

Yesterday I stated that Wednesday’s downside only added back the lack of clarity we have been dealing with the last eight weeks. Today’s continuation of that selling could help clarify the direction going forward, but we still need to follow through on the downside and break key support levels to establish the short term downtrend. Patience will be rewarded as we move forward, don’t assume or anticipate anything.

Running the EGG Scans – First the daily winners… Short Small Caps (TZA) downside risk in the sector is back and tested the key break point before making a move higher to close the day. This is the leading candidate for the downside trade (EGG selection for tomorrows trading day. Short Gold Minders (DUST) made a 4.5% move on the upside today. Still not leading in the 5 or 10 day scans, but the jump puts it on the radar as the move above $24.55 was first move to break on the upside. Short Financials (SKF) moved up 2.1% to get some recognition of the selling in banks the last couple of days. As move above the $17.40 level is worth our attention. Treasury bonds were on the rise again and are following through on the break higher on Wednesday. This was significant rotation from the scans all week. The shift towards selling is changing the scans on what is trending. Patience is the key.

The five day scan is where I am focused currently for leaders to the upside breaking from the consolidation pattern set up the last six weeks.

  • KOLD or DGAZ leveraged short natural gas is leading over the trailing 5 and 10 day scan periods. $42.60 on KOLD is the break of the next resistance levels. Failed to do so today as the rally in UNG of 1.4% sent the short trades down. Watch to see how it plays out tomorrow. KOLD hit stop on our entry earlier this week. Nice gain posted.
  • SVXY – short volatility index is still in the top of the scan. Holding in the ONLY ETF Model still. Early volatilty moved to our stop on the position despite the late day rally as volatility eroded.
  • ERUS – Russia has moved off the lows on positive comments from Putin. Move above $18.64 would be breakout point for the ETF. (broke higher on Tuesday above resistance and entry.) Some selling today to test the move. Stop is $18.50 for now.
  • EEM – emerging markets breaks from the consolidation pattern and the leverage is version (EDC) is in the top performing for the trailing five days. Selling today hit our stops at $42.25 as the index dropped. Bounced some off the lows, but still watching going forward for opportunity.
  • DRN – leveraged Real Estate is the other leader. IYR is the non-leveraged version and is up nicely as well. Watching as the sector gets overbought short term. Some more testing today, raised stops and watching.

EGG Model Watch List: Posted EEM trade for Thursday 5/8. Gap over the entry and then tested lower and keep moving lower. Added partial position at 41.80 into the close Thursday. We added to the position again on Friday as it stayed in the range and looked lazy. That changed on the gap open Monday and has moved higher this week. We hit our stop on the position and now we look for the next EGG position.

As stated above TZA, short small cap index is the what came up on the scans today that is trending and in position to accelerate if the index breaks lower tomorrow. Be patient and let this unfold. Be aware of the bounce back potential as the markets current mode of operation is choppy.

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