ONE EGG Scan for December 12th

We continued to watch the VIX index as it continued higher for the trading day hit the 20 mark on the close. This shows the uncertainty in the markets currently and the pressure from the energy sector. We could get a push lower based on the progress of the index and the level of anxiety from investors. Watching the downside risk as it builds.

We erased the bounce from morning¬†and in most cases closed higher, but it still shows some selling into the rallies and that doesn’t generally end well. Watch to see how this unfolds heading into the trading day on Friday.

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 give back on gains Thurday, 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 morning again and still has the trading range in sight. 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. otherwise we watch.

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. Even the bounce on Thursday’s open left us with a selling bias from view. Not much changed on the day after was all said and done. Watch and be patient as the scans didn’t change anything on the day.

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 РVIX moved above 20 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.

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. Short trade working well.

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 higher despite bounce attempt with SVXY. Didn’t last and volatility still in play.

S&P 500 index 2018 support level to watch and setting up for showdown with traders.

More in the morning on this.