Short term trend is higher, but Tuesday’s economic data puts on alert relative to the reaction or action taken by investors moving forward.
Sectors Worthy of Attention:
Uranium (URA) Got the big lift higher last week on the comments about building nuclear power again around the world and the price jumped more than 20%. The action redefined a reversal on the move. Thanks to the comments from Japan about restarting their nuclear energy fleet. CCJ is the company who announced the plans for the 48 reactors in Japan. There are only 11 stocks in the ETF fairly easy to scan for the leaders. Last week started to test the move on the upside again and it needs to hold the $13.20 level as support. Testing in earnest on Monday and Tuesday watching to see how the flag pattern holds up?
Energy (XLE) is still reacting to oil as it attempts to define direction among the speculation. Worries have pushed oil prices lower, but the underlying buying in the stocks have remained. China and European data on Friday helped push crude higher along with the sector. ETFs to Watch: USO, XOP, OIH, IEO, ERX or ERY. TODAY: Downside grew in response to production cuts not materializing near term. This is an exit signal and possibly a short signal for the sector stocks going forward.
Basic Materials (XLB) – commodities, and the energy sector have been a weight on the sector, but made a move technically and cleared the $48.50 level. ETFs to Watch: XLB – made move above $48.50. Hit the entry point and nice follow through on the move. TODAY: $50.75 mark is the next level to take out… watch and let this play out short term. EXIT at $50.
Consumer Discretionary/Retail broke higher last week and continues higher this week after a bumpy start. 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: Watch the test from Tuesday on the downside? It is in response to the consumer sentiment… stick or reverse.
Biotech fell in response to the elections on belief the Republican controlled Senate would attempt to make changes in the Affordable healthcare bill. Reality of that happening short term is not great assuming a President who passed the legislation is still in the White House. Could present opportunity on the selling short term. ETFs to Watch: IBB, BIB, BIS, XBI. Need to be patient and let this consolidation unfold. TODAY: Breaking from the consolidation pattern and XBI gapped above our entry point below for the trade… small test on the move, but we will watch tomorrow to see how it unfolds. IBB in position as well on the upside.
SOXX – Semiconductors completed the ‘V’ bottom pattern and is stuck in small trading range looking for the upside catalyst. This can still go either way, but the move Friday boost the outlook on the upside as the technology sector rallied overall. You can trade SOXX, SMH or SOXL on the break higher in the sector. TODAY: held the upside move and added to the upside move to new high.
Global gained upside traction last week, but … TUR, EWH, EWL, EWS, EWN, EWT – all tested the moves. But, Friday was buy a global ETF day! — heading higher as noted by EDC, EWZ, ILF, ZA and other showing up in the daily momentum scans.
Markets creeping higher… overextended? Can’t make assumptions just have to watch for clues in the charts and the data. We just have to take it one day at a time. Oil prices could be the negative catalyst for the markets short term. Worries about the economic impact to jobs, etc. could feed on itself. Watch and manage the risk response going forward.
Running the Daily EGG Scans:
UGAZ – natural gas responds to the selling again with a bounce. $16.50 entry on this if it follows through for trade.
RUSS – short Russia… response to the oil meeting today and their response to cutting production? I say yes. Watch the reversal, move above $16.75 is of interest for trading purposes.
SCO – short crude oil… the negative sentiment from the meeting today sent traders to the sell side. Cleared $44 resistance and OPEC meeting on Thursday may feed the acceleration on the downside short term.
GDX – Gold miners move higher. gold was up modestly and the miners are playing some catch up from last weeks move. I like the miners short term for a upside trade.
SIL – Silver miners moved in conjunction with gold miners. $10.40 level is of interest on the upside.
TMF – Treasury bonds rally on worries. Rotation back to bonds? This is one to watch as relative to the continuation of the move on the upside. Strong five year auction today as well.
Current EGG Proposed:
XBI – Biotech made nice move on Friday and making a move from the consolidation pattern of a wedge or triangle. Break above the $174 level would be of interest for a continuation of the upside. I like the sector momentum and the consolidation is a positive for the upside to continue. Watching how this open on Monday and adding to EGG table for the entry and trade. BIB is the leveraged ETF for the trade and I would prefer it, but have to watch the volume and we will see if it worth attempting based on the interest. IBB in similar position and needs to move above the $297 level, but large caps are driving the markets currently and make better choice from risk perspective.
Gapped higher on the open and no real test of the move as it drifted higher throughout the day. We are watching to see how it trades in the AM. Patience is key when picking the opportunities.
Small test on Tuesday, but not enough to interest me as the upside margin would be too thin. Watch in the AM how this responds.
1) ITB – Home Construction wants to break from consolidation and looks ready to move higher. Positive news in the sector the last two weeks has been keeping the upside as a possibility. Hit the entry and we have left the trade posted on the table. We did not get executed in the trade due to volume issues for the size we were trading. Very thin volume on the test and could not get the fill we needed on the trade. If you took the entry manage it out based on the post. Use stop of $25.75 currently.Jumped on existing home sales last week and move through the resistance. Watch and manage your stops accordingly.
Some bad news in the home prices and honoring your stop is the best move for the position. If no bounce back in the AM I would take my profit and close the position with a 6% gain for the 2 week trade.
2) GDX – Gold miners are still adjusting to the outlook and speculation in gold. Gold held, but the miners sold lower on speculation. If gold can move higher near term this is still of interest. If it becomes purely a speculation based trade the metal will rally and the miners will lag. Still watching for the move.
Hit the entry late in the trading day. Looking for test and add the position in the AM. Need to see a follow through on this as the last trip up here the reversal was significant on the test. I will address this further prior to the open here in the notes before 9 am.
The futures are pointing lower on GDX… could test the $20 level again at the open and bounce. We will take the entry based on the post. Laddering into the position is an option as well. If holds the first 30 minutes of trading at support and starts to move up add some at or near the low and some at the entry point to average the price. This is a volatile trade and needs room to move around. Gold is flat in morning trading.