ONE EGG Scan for December 16th

The uncertainty of the outcome relative oil continues to drag market lower. Two days of attempting to post a gain have met with more selling and a lower close. The micro term downtrend is not establish and the how long will it last being the main question going for ward.

Sectors Worthy of Attention: 

Healthcare, technology and Financials all have moved lower this week. The significance of that is their leadership on the upside is turning down and that only serves to confirm the move by the broad markets. Watching all of them as confirmation going forward.

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. With crude continuing to the $55 mark the shorts are still in control. XLE was up 1.1% as buyers were willing to bottom fish.

Biotech РTested lower on Friday and followed through to support on Monday at the $297 mark. Tuesday it broke support and tested lower. This is worth watching as another confirmation of the downside gaining traction. Holding support is important for the leader and the market. Break could open more downside.

Small caps erased their gains from morning again and held the break through bottom of the trading range. The Friday close set up the short trade in TZA. The break of support at the 1153 mark and the selling momentum held on to take the index lower and the short trade in play. I took note of index hanging tough on Tuesday and still expect some bounce potentially back into the trading range.

Markets are still playing the worry game as oil remains in¬†the limelight¬†to start¬†the week.¬†If oil bounces slightly or holds at this level the buyers want to put some money to work. After all it is Christmas… a time for giving.

Running the Daily EGG Scans: 

We started the week with a downside bias and we have to respect the trend shift in play. That leaves the scans with a negative connotation to them and filtering the good and the bad together signals plenty of caution short term relative to risk/reward. Watch and be patient as the scans are shifting to the downside plays and they will accelerate fast, but bounce sooner. Risk management is key.

Some sector bounces to watch… XLE, IEV, IEZ upside — XPH, XLF, XLK downside. Losers bounce, leaders sell. Need both to bounce if this is going to shift from the sell side overall.

DGAZ – short natural gas testing the lows again on UNG, but it this a sympathy trade with oil or is there real weakness in the commodity. Inventory data is showing sympathy. Still watch for bounce if you are short.

ZSL Рshort silver drops big along with gold prices. Continued to sell without gold on Tuesday.

GLL – short gold as money rotates away from the metal again. Small bounce on Tuesday and watching as traders speculate on direction.

SMN – Short basic materials took on some leadership Friday and it is trading down with the commodities and the potential impact to demand in the sector.

ERY РShort energy remains in play.  Small bounce to watch from Tuesday, but the bias is on the downside.

SCO РShort crude oil with the push lower on speculation of too little demand for the increase in production. No bounce yet to speak of.

TMF РLong Treasury bonds as money rotates again to safety! Fear in the markets, as money looks for safe home.

VXX – VIX moved above 23 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. Uncertainty pushing index higher.

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.

RUSS Рshort 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 early to $64 and closed at $45.90. 30% swings are a bit much for my taste.

Current EGG Proposed:

Short trades have set up on the major indexes and relative strength on the short ETFs are pointing higher.¬†Futures are pointing higher again today and another attempt at a bounce on the upside. question is will it hold and if so how does it play out today. Short trade is of interest as it was yesterday… entry is the question mark. Watching how it unfolds today and the conviction level of the buyers early. I will post to the table the trade set up if it is worth the risk.