ONE EGG Scan for December 18th

Did the uncertainty get cleared up by the Fed? The cause of the issues have been oil prices falling to $55 a barrel over the last three weeks. Oil closed at $56 on Wednesday? Oh yes, it was the Fed controlling the price of oil. This uncertainty brings news and event driven moves within the trend. Move lower was on worry first and it extended to oil, global economics, US economics, etc. etc. etc. The Fed gave clarity on one level… interest rates and that provided some mental relief in terms of the current selling… now we see how that unfolds and if it overlaps to ease worries in other areas to bring back confidence about the future growth. Patience is required… simply put.

Sectors Worthy of Attention: 

Healthcare, technology and Financials all have moved lower to start this week. The significance of that is their leadership on the upside was turning down and that only serves to confirm the move by the broad markets. The reversal or pivot off the lows helped ease the pain of this issue, but it still needs to follow through and the futures are pointing in that direction Thursday morning. We will watch to see what unfolds.

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. XLE has moved up 5% off the low. Established a pivot point with the buying on Wednesday… how much upside without crude moving higher?

Biotech – Tested 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. THURSDAY: Reversed back through previous support and could now reestablish it’s previous leadership role.

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. THURSDAY: it did just that on Wednesday with a 3% bounce on the upside. Looking for it to establish some leadership on the upside.

Markets are still playing the worry game, but the Fed injected some positive momentum to a market with plenty of cash to put to work. Don’t be surprised if this feeds on itself into the holidays and possibly the new year.

Running the Daily EGG Scans: 

We started the week with a downside bias and we have to respect the trend shift in play. The bounce or pivot off the lows shifts the scans last night to positive, but you have too look further which means another day or two is needed in our scans to confirm any shift or upside trades.

TNA – small caps lead the reversal and looking for follow through.

FCG – energy stocks leading the bounce as a sector for now. It also sold the most on the downside move.

SOXX – solid bounce from a previous leader potentially returning to that role.

IBB – biotech bounced as well and is a previous leader looking to regain the role.

FAS – financials bounced back as well following a couple of tough days of selling.

TMF РLong Treasury bonds as money rotates again to safety! Fear in the markets, as money looks for safe home. WEDNESDAY this moved lower as money rotated back towards stocks. Watch the downside risk short term.

VXX – VIX moved above 23 as the uncertainty towards the impact of oil hit investors again. Uncertainty pushing index higher. That reversed on WEDNESDAY and looking for SVXY to take the leadership on the rally.

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. (WEDNESDAY bounce to watch as this could reverse short term.)

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. (WEDNESDAY gave bounce on all the talk about Putin and the Russian central bank making the right moves? still too many question marks for me.)

Current EGG Proposed:

Markets make a pivot off the lows lead by the energy stocks have two days of upside. The Fed aided move is to be watched as a trading opportunity and nothing more currently. The follow through or sustainability of this move will have to be validated. We need another day of trading to confirm the move and we will look to see what unfolds today that offers upside trading or downside trading opportunities that fit the strategy for the ONE EGG.