ONE EGG Scan for December 3rd

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? Tuesday they put money back to work in healthcare, financials, energy and small caps. Still plenty of work to be accomplished before this all dies down.

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¬†OPEC meeting pushes them off the cliff… for a day or two. The challenge in the sector is the ability to deal with the reactions and determine what is real and what is speculation.¬†Did move off the lows with a solid bounce on Tuesday. Patience as news is driving the action.

Consumer Discretionary/Retail broke higher last week and continues to hold the uptrend despite some negative retail reports from the Thanksgiving weekend shopping. 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: Held support, but the sales reports for Black Friday being down 11% on preliminary data are hanging over the sector for now.

SOXX – Semiconductors testing the uptrend in play for the leading sector. Watching to see how it unfolds and any opportunities within the sector. Small bounce on Tuesday, but still need some confidence in the move.

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. EEV is short ETF for the sector and in position to breakout at $19.10.

Markets playing ping-pong currently on direction and news related issues. Willing to let this settle before jumping the world of up and down day to day. Tomorrow will provide more info and trading and we will add it to what we have currently and look for the best direction or opportunity.

Running the Daily EGG Scans: 

IBB – biotechs bounced back to keep the upside in play.

VIX – Volatility index reversed directions on the buying Tuesday. SVXY bounced with the downside of the move.

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. SCO returned on the upside on Tuesday… didn’t take long. Downside risk remains for now.

SOXX – started lower again early, but bounced off support and closed on the upside. Expect some consolidation short term.

YINN – China bounce back after selling on economic data on Monday? Another issue of volatility and lack of commitment in either direction.

Small Caps (IWM) – RUT-X index was at support of 1153 on Monday. Today it is back at resistance at 1170? Too many question marks in this type of trading to take the risk of a trade near term.

DGAZ – short natural gas is becoming a upside trade as well the last three days. The reversal from the upside following to cold start to winter has been lost in the worries over commodity prices relative to demand. If the downside is the direction then you go with the trend. UNG is now in position to retest the lows of October at $18.96.

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.

Current EGG Proposed:

To much back and forth without conviction or direction at this point. The news being dominated by energy and energy stocks… investors are all over the place with buying one day on optimism and selling the next on pessimism. Small caps were a perfect example with a 1.6% drop on Monday and a 1.2% gain on Tuesday. The index has set up a potential short trade that never materialized as the index reversed just 24 hours later. In running the scans we find this to be true even in leaders like biotech and semiconductors. Patience is the name of this game and we will give it some room and time to define direction.

As always if things shift with the futures we will update this in the morning prior to trading on the table.