ONE EGG Scan for July 9th

Intraday reversal on Tuesday was a fake out for the China bomb dropped on the markets globally. The NYSE shut down of trading only added to the downside drama on the day. In the end the sellers dominated and we look to today for more insight good or bad. The speculation trade is winning and there is still too much uncertainty for my taste. Trend turn into a choppy mess. No surfing in this weather. Be patient and wait for the chop to settle and direction to arise.

FOMC minutes was a nonevent for the markets and reading the decision notes left you wandering exactly what is the Fed looking for? Patience remains the buzz word for the day.

Result for the Daily EGG Scan: 

Potential leadership results our scans produced for today…

  • 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. Nice move higher.
  • VXX – Volatility was back in play on Wednesday, but this time it stuck with VXX closing at the $21.35 mark. upside in place.
  • XLU – Utilities bounced off the low? any upside for the sector despite interest rates? Big question mark going forward. Held the move higher with nice jump on Tuesday. Held with small test on Wednesday.
  • ERY – short energy is back on the upside with crude selling to the bottom of the range. Watch the $20.45 level to break high and possible trade. Hit the entry and retraced, but has played out nicely on the downside trade. Stops at the $22.25 mark. Still looks positive.
  • Short trades took off on Wednesday! Started out aggressively and the selling stuck on China, Greece and NYSE rattling the investor confidence.
  • New views for Tuesday… DUST (short gold miners on selling in gold.) YANG (big follow through on selling in Chinese stocks.) EDZ (short emerging markets continues to accelerate on the dollar and China.) All three accelerated on Wednesday followed through on the opportunity.

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

  • SQQQ – short trade on the NASDAQ set up with reversal move in the index Tuesday? watching for confirmation. Got the confirmation and move higher on Wednesday as the index struggles.
  • DBA – jumped to the top of the list as other leaders lose their gains. Testing the $22.80 support mark?
  • WEAT – wheat is running higher and created short term opportunity with move higher. Pennant pattern on the move higher… watch.
  • SOXS – short semiconductors setting up on trend reversal. $48 entry for adding to the position worth watching. Look for how this plays out today following the intraday reversal and follow through on Wednesday.
  • TECS – short side of technology showing some positive… watching for follow through. Got it on Wednesday.
  • TZA – short small caps setting up as well with bottom reversal and break above the $9.85 level worth trading. Held the move higher on Wednesday.

Current EGG Position:

Downside risk is still in place as investors decide which side offers the better opportunity to trend near term. Tuesday attempted to bounce off the lows, but reversed to retest the lows on Wednesday with the sellers exerting control. Still looking at the scan result for direction and we continue to see high risk opportunities, but prefer to be patient for the near term and let it all unfold. Flip of the coin, news of the day or just plain old worries period are driving the day to day activity. Need some clarity if we are going to put money to work.

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.