ONE EGG Scan for January 6th

Monday set up as we discussed and the downside accelerated. The gap at the open stalled the entry on the SDS trade and I didn’t take the trade. The ask was twenty cents above or 1% which is where I will wait for a test or better entry point versus chasing an entry. Needless to say the test didn’t happen and I missed out on the trade. Being disciplined in trading means missing some trades that look good in hindsight. There will be more opportunities as we go forward.

The move Monday puts the sellers in control and that is showing up in the scans for today. Crude is down near $48 in early trading and that will put the US markets back in the worry mode to open. The futures are slightly lower, but watch how it unfolds early.

Sectors Worthy of Attention: 

Crude oil is heading lower again and the downside move has come back into play short term. SCO jumped higher again to end the week and is worthy of attention. Added to the downside on Monday. Short side is still in play.

Emerging markets (EDZ) returned to the downside again as the uncertainty about the global markets were renewed. Greece is part of the issue along with the stronger dollar. Watch downside opportunity this week. Added to the downside on Monday and short trade is working.

Treasury bond (TMF) rotation back to safety to end the week pushed the bond higher again and the yield back near the December lows. Watch to see how that story unfolds this week as well. Added to the upside on Monday with the uncertainty rotating money in the direction of safety.

Gold and gold miners (GDX) made a nice move higher on Friday and has attempted to bounce off the lows. Looking for follow through to start the week a possible trade opportunities. Added to the upside with nice move on Monday.

REITs (DRN) sold on Thursday, but made nice bounce on Friday to keep the uptrend intact. Flight to quality or dividends is in play and added upside on Monday.

Two to watch on the downside are SDS and QID. Both the S&P 500 index and the NASDAQ are showing double top patterns or reversal opportunities. Monday both moved higher with the broad indexes trading down nearly 1.6%.

Markets are still playing the worry game as the uncertainty returned last week with oil prices dropping, economic data disappointing and the global markets showing more weakness. Don’t be surprised if this feeds on itself more going forward.

Running the Daily EGG Scans: 

We started the week with a downside bias and we have to respect the potential trend shift in play. Be patient and take what the market gives. Monday confirmed this belief and we are now looking at trading the downside move with an eye of the key support at 1972 on the S&P 500 index.

Short S&P 500 index double top pattern could complete and offer downside trade short term. Confirmed on Monday – missed the entry, but watching how it moves today.

Short NASDAQ index with same double top pattern that could complete a reversal and short term downside trade opportunity. QID moved above the $40 mark for entry Monday and watching for continuation as well.

Gold miners (GDX) breaking from a bottom consolidation offers some upside opportunity as well with a short term target of $20.30. Monday hit the $19 entry point and watching for the target o hit short term.

Current EGG Proposed:

Short the S&P 500 index (SDS) is what I am watching as a trade opportunity to start the week. Entry is $22.15. Stop $21.75 and target it the $24 mark. Let it unfold early if the trade is to work. SEE ABOVE – gapped 1% on open and never gave test to take the entry. Still watching today.