ONE EGG Scan for July 14th

Positive response to the deal with Greece and the EU. The positive gap higher set the tone for the broad markets, but still has work to validate the upside reversals. This market is not playing with much conviction and the move on Monday was positive, but lacking in conviction. Earning this morning from the banks will kick things off as JPM and WFC announce. Banks, my view, are key to where we go near term. Watching how this unfolds today.

Result for the Daily EGG Scan: 

Potential leadership results our scans produced for today…

  • SOXS – short semiconductors are still in play and the move lower on Thursday and modest bounce on Friday?  Watching. Attempted to bounce on Monday, but showed little in terms of conviction.
  • DWTI – short crude trade is back in play as the price of the commodity comes under pressure on the supply/demand side of the equation. Consolidating move higher. Stops in place.
  • SVXY – volatility gets taken out of the market on the buying to start the week.
  • UNG – positive move in natural gas and could setup a upside trade short term.
  • BIB – Biotech made gap move higher and in position to test the June high.
  • FAS – Financials gapped higher as well and looking for banks (KBE) to lead.
  • TNA – Small caps made follow through move to the start upside on Friday.
  • Monday follow through puts the bounce trades in place and a follow through swing trade makes the most sense technically, but the recent chop makes the trade a tough call… All we need is some news to disrupt the flow and the upside moves are easily negated. There is little if any confidence relative to a follow through… Patience.

Moves of interest trailing ten days: Big rotation in place near term.

  • DUST – short gold miners have been trending higher since the lows in June. It has some chop, but still worth the risk. Close above $21.50 gets interesting with break from the cup pattern.
  • DWTI – short oil is now in a flag pattern consolidating the gains. A continuation is worth trading, but plenty of news/speculation on oil rallying? Caution on the commodity is a must.
  • VNM – Vietnam moving back to the previous high and looking for the upside indicators.
  • FXP – short China trade is fading with the bounce… watching how it unfolds.
  • SOXS – short semiconductors setting up on trend reversal. $48 entry for adding to the position worth watching. Look for how this plays out with stop at break even.
  • Looking at the 10-day scans we se little in terms of opportunity based on the chop day to day. Patience is key… three days of upside is shifting the bias back to the buyers or upside trades. This is exactly the issue we discussed above… too much movement to trade any conviction moves. Still patiently watching for the decisions on either side.

Current EGG Position:

Volatility intraday and day-to-day is keeping us from much trading currently. It elevates the risk/reward on positions as anything can transpire overnight to disrupt the markets. Too many worries in place and for that reason we are willing to be patient. We have posted above trades that make sense, but still have not met the entry requirements relative to the EGG strategy. Three positive days helps restore some confidence and we will watch how this unfolds going forward.

This is clearly remains a news driven market which making trading a challenge. It has been challenging to hold trades and let them develop, but we have hit new highs on the NASDAQ and some leadership is showing in Financials, Healthcare and Consumer Discretionary sectors. We are essentially in an extended sideways market that is not attempting to break higher. News is driving the day to day activity. The shortened holding periods makes risk more imperative to manage. Not convinced that either side has control of the direction. Manage positions aggressively based on risk and discipline.