Short term trend is higher, but economic data, OPEC’s and now the ECB are impacting the markets and the issues with crude prices have raised question marks short term for broad markets. Still a traders market and still looking for something to define direction near term… sustainable longer than a day or two.
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. There was a move off the lows with a solid bounce on Tuesday and Wednesday. TODAY: Crude fell near the $65 mark and pulled the sector lower… bounce or fall is the question.
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: XRT is still struggling and putting pressure on the broad sector looking for the bounce or fall below $90 support.
SOXX – Semiconductors testing the uptrend in play for the leading sector. Watching to see how it unfolds and any opportunities within the sector. Still leading and still setting the pace for the broad markets.
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. Monday is starting the run to year end and looking for some separation in leadership as we start the week.
Running the Daily EGG Scans:
Not much changed on the week as it started lower and worked its way back to ending flat as if the markets were trading in place when it was over and done. Watching for the catalyst or drift higher in the broad markets.
FAS – Financials bounced back to a leadership role on Friday… can it follow through to start the week? Banks posted a big day on Friday after lagging for nearly three weeks.
SOXX – follow through on the reversal and hit new high to end the week. The leadership is still in play.
YINN – China bounce back after selling on economic data on Monday? Another issue of volatility and lack of commitment in either direction, but the uptrend is established if you can stomach the volatility day to day.
ERY – Short energy back on the table? It was Friday and one to watch to start the trading week.
SCO – Short oil is a reason ERY is a watch, that would make this a watch as well to start the trading week.
Small Caps (IWM) – RUT-X index was at support of 1153 on Monday. The last three days put together a move back to 1182 and heading towards the 1190 resistance level again. If it can gains the momentum to move through 1190 it could be a trade position into year end.
DGAZ – short natural gas has been a great upside trade this week. The reversal from the upside is a result of “warmer weather” now versus the cold front experienced during the Thanksgiving week. UNG broke the lows of October at $18.96 and added to the downside. Oversold? Answer was yes and the bounce on Friday gained 4% and a watch to see if the upside can add any trading opportunity.
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. Friday helped and looking for some follow through on the upside. The news is 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. ECB brought nerves back into the mix. Small caps were a perfect example of recent volatility with a 1.6% drop and a 2.4% gain the balance of the week. A upside follow through could change the make up of the market moving to year end. In running the scans we find little leadership with the clear exception of biotech and semiconductors. As stated above there are some moves of interest, but they need to time to unfold. 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.