ONE EGG Scan for December 2nd

Short term trend is higher, but economic data and OPEC’s impact on crude prices have raised question marks short term for broad markets. 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. Did move off the lows intraday on Monday… Watching for a bounce trade.

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: Sold on the sales reports for Black Friday being down 11% on preliminary data. Cyber Monday in play as well tomorrow. Short side could emerge if the speculation steps in.

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: tested lower? Hit stops on some positions and could be an interesting downside trade in negative sentiment grows.

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. Short side could be worth a look short term 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: 

GDX – gold miners tank in response to oil prices on Friday. Monday the rallied back gaining 7.4%. Flip a coin and we will decide on tomorrows direction. I am with the upside fundamentally. Gold bounced back above the $1200 mark.

EDZ – emerging markets short trade is gaining traction and worth watching short term.

UCO – long side of the crude trade was in play on Monday…. but SCO – short crude oil… is still on my watch list as the noise over production versus consumption has not been settled. Until OPEC agrees to cut production downside is the bias.

JJG – Grain Commodities pushed higher and back near the resistance at $39. upside remains in play. DBA made move on upside as well.

SOXS – short semiconductors showed up on the selling today. Worth watching if the downside for the sector accelerates.

TZA – short small caps is on the list today as the index is back at key support levels and a break opens the downside risk for the markets near term.

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.

Gapped above the entry price moved up and down, but didn’t test the entry point we posted. Still watching in the AM as to what direction the broad markets head. The S&P 500 index help up better than the other indexes and leaves some downside speculation in place. I will adjust the table if entry makes sense in the morning.

Previous Posts:

ITB – Home 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. HIT STOP or should have sold position last week.