ONE EGG Scan for December 11th

We continued to watch the VIX index for trading today and it again gapped higher into the trading day and we watched for a test, but today the issues with the price of crude oil feed the downside all day and never looked back. The attempted move higher was met with more selling. The worries are in play and the issues will unfold further in tomorrow trading.

We erased the bounce from Tuesday and in most cases closed below those intraday lows which, for me, is not a good thing going forward. Watch to see how this unfolds heading into the trading day on Thursday.

Sectors Worthy of Attention: 

Energy (XLE) Trend is down short term (3-9 months) as established off the June highs. Each support level or attempted bounce has met with more downside as the price of crude continues to fall. Some are projecting a bottom at or near the $60 level and it bounce off that level on Wednesday. Not much room left and the downside accelerated to start the week. Short side is still the trade of choice for now. ERY had big day on the move lower.

SOXX РSemiconductors testing the uptrend in play for the leading sector. Watching to see how it unfolds and any opportunities within the sector. Still leading and still setting the pace for the broad markets. The downside extended further on Wednesday and looking to hold the $92.50 mark or short term exits will trigger.

Biotech Рremains a leader for the broad markets. Some selling on Wednesday, but not enough to change much at this point, but it does put us on notice relative to the sector.

Small caps erased their gains from Tuesday along with any good will. Now it is up to the sector to maintain support at the 1153 mark and find the momentum to break through the upside resistance at the 1190 mark.

Markets are still playing the worry game as oil steps back into the limelight on the week. Global economics with Europe and China leading the charge. Geopolitical issues still brewing with Russia as they continue struggle with weaker currency and weaker economic picture with oil prices declining. News, Events and Fundamentals are mixed and keeping a lid on the market short term.

Running the Daily EGG Scans: 

We started the week on the downside and that has been the bias. That leaves the scans with negative connotations to them and filtering the good and the bad together signals plenty of caution short term relative to risk/reward.

ERY РShort energy is back in play and the move this ween has never looked back. Crude oil back near the $61 mark is the reason. (Bounced modestly on Tuesday, but still dropping.)

SCO – Short crude oil is back as a trade with the push lower on speculation of too little demand for the increase in production. (Bounced modestly on Tuesday, gave back the gains closed flat on the day.) Followed through on the downside Wednesday and SCO added 7.2%.

TMF – Long Treasury bonds as money rotates again to safety! Fear in the markets, but not sure how much upside there is in the bond rally as yields are already at 2..16% for the ten-year bond and 2.83% on the thirty-year. But they found a way to move higher again on Wednesday.

VXX – VIX moved above 18.5 as the uncertainty towards the impact of oil hit investors again. The challenge has been weakening global data and reference to the stronger dollar not helping exports. Regardless of the banter the real issue bothering investors is oil prices and uncertainty of the impact. (See Jims Notes blog post Monday.)

SDS – Short S&P 500 index pushed lower and is now on the radar for a possible short trade opportunity if this move extends lower.

EUM Рshort emerging markets broke through resistance on the day as EEM broke support. Downside trade has been setting up and got the follow through to validate. Fell again on Wednesday as follow through on the break lower Tuesday.

DGAZ – short natural gas has been a great¬†upside trade this week. The reversal from the upside is a result of “warmer weather” now versus the cold front experienced during the Thanksgiving week. UNG broke the¬†lows of October at $18.96¬†and added to¬†the downside.¬†Oversold?¬†I would say yes, and it is attempting to work it out on two failed bumps off the low, but we are still near¬†the low and looking for a bottom to build?

RUSS – short Russia remains in the forefront as lower oil prices could have a negative impact on the finances of the country. Plenty on conspiracy theories in the media the last week on this topic. This ETF has spiked higher as a result. This has gone vertical.

Current EGG Proposed:

VXX still trading, but SVXY may be the better trade if the uncertainty calms going into tomorrow or Friday’s trading.

Small caps failed on the day and 1153 break opens the short term on TZA.

S&P 500 index 2018 support level in play and break opens downside play as well.

More in the morning on this.