ONE EGG Scan for December 1st

Short term trend is higher, but Tuesday’s economic data¬†and Friday’s reaction to oil prices and OPEC is in the mix. How much speculation will investors ignore moving forward and how much will they react to?

Sectors Worthy of Attention: 

Energy (XLE) is still reacting to oil as it attempts to define direction among the speculation. Worries have pushed oil prices lower¬†and now OPEC meeting pushes them off the cliff… somewhere in this reaction and news lies an opportunity for those who are patient and diligent.

Consumer Discretionary/Retail broke higher last week and continues higher this week after a bumpy start. A move through the $68 level on XLY got the upside catalyst from earnings and remains on the upside. XRT is of interest as well with the move above the $90 level being tested currently. Still like the outlook through the first quarter. TODAY: Nice follow through on Friday as the shopping looks to be positive from reports.

Biotech fell in response to the elections on belief the Republican controlled Senate would attempt to make changes in the Affordable healthcare bill. Reality of that happening short term is not great assuming a President who passed the legislation is still in the White House. Could present opportunity on the selling short term. ETFs to Watch: IBB, BIB, BIS, XBI. Need to be patient and let this consolidation unfold. TODAY: Breaking from the consolidation pattern and XBI continued higher to end the week. Let it run.

SOXX – Semiconductors¬†completed the ‘V’ bottom pattern and is stuck in small trading range looking for the upside catalyst.¬†This can still go either way, but the move Friday boost the outlook on the upside as the technology sector rallied overall. You can trade SOXX, SMH or SOXL on the break higher in the sector. TODAY: held the upside move and added to the upside move to new high. Manage the risk.

Emerging market made another dip lower on the stronger dollar and unrest in the oil markets. The commodity dilemma is hurting the sector as well.

Markets creeping higher… overextended? Can’t make assumptions just have to watch for clues in the charts and the data. We just have to take it one day at a time. Oil prices could be the negative catalyst for the markets short term. Worries about the economic impact to jobs, etc. could feed on itself. Watch and manage the risk response going forward.

Running the Daily EGG Scans: 

JDST & DUST – gold miners tank in response to oil prices. Yes, oil prices. It is another nail in the inflation coffin. The other issue lies in the buyers like Russia will have less money to buy. I could go on and on… oversold my view and worth watching the reversal as it appears and nerves settle.

RUSS – short Russia… response to the oil meeting today and their response to cutting production? I say yes. Watch the reversal, move above $16.75 is of interest for trading purposes. (as stated on Wednesday… the opportunity was there if you were willing to accept the risk.)

SCO – short crude oil… the negative sentiment from the meeting today sent traders to the sell side. Cleared $44 resistance and OPEC meeting on Thursday may feed the acceleration on the downside short term. (Again, the opportunity was there for the gamble on OPEC meeting as oil dumped in response.)

TMF – Treasury bonds rally on worries. Rotation back to bonds? This is one to watch as relative to the continuation of the move on the upside. Strong five year auction today as well. (again, money rotated towards safety play on the speculation around the price of crude.)

XLP – Consumer Staples jumped on Friday in response to the fight to quality and dividend plays. Consumer is also predicted to have a strong end of the year, but these are the toilet paper stocks… quality and necessity driven not items that benefit from the holidays.

Current EGG Proposed:

Volatility index (VIX) moved off the lows on Friday. If the concerns relative to the energy sector gain traction heading into the trading week this is will be the opportunity to take advantage of the uncertainty surrounding the news and events. We will manage the position accordingly. Don’t chase on the entry should things escalate during the weekend. VXX, iPath S&P 500 VIX short-term futures ETF is the trade.

Previous Posts:

1)  ITB РHome Construction wants to break from consolidation and looks ready to move higher. Positive news in the sector the last two weeks has been keeping the upside as a possibility. Hit the entry and we have left the trade posted on the table. We did not get executed in the trade due to volume issues for the size we were trading. Very thin volume on the test and could not get the fill we needed on the trade. If you took the entry manage it out based on the post. Use stop of $25.75 currently.Jumped on existing home sales last week and move through the resistance. Watch and manage your stops accordingly.

Some bad news in the home prices and honoring your stop is the best move for the position. If no bounce back in the AM I would take my profit and close the position with a 6% gain for the 2 week trade.