ONE EGG Scan for October 14th

Monday added to Friday’s exclamation point on direction for the short term. The NASDAQ 100 index is down 4% in two days and accelerated the micro downtrend off the September 18th high. Support failed at the 3850 mark and now we look to the 200 day moving average. Selling volume accelerated and is keeping the sellers firmly in control of trading. The VIX index is the leaders on the scans as it has moved through the 24.4 level with the fear factor rising. This equals the level reached in June 2013. This is the highest level reached since the 2011 uncertainty before the quantitative easing program from the Fed. This leaves us with the question, if the Fed completes QE the end of the month, do we return to the 45 level on VIX relative to the same global fears that were in existence then? Something to ponder.

Running the EGG Scans

A continuation in the accelerated selling on the major indexes as investors run for cover. What to watch this week based on the scans:

Volatility Index (VXX) jumped to 24.4 and a new high on the current trend lower in stocks. As stated in Friday’s update, the close above 21.5 would be key relative to the sellers owning control and 26.5 would be the next level of resistance. 26.5 would be the next target from here if the anxiety to push the downside for stocks continues.

Small caps (TZA) dumped back to the previous lows on the Russell 2000 index. Looking at the weekly chart the $19 level is next resistance for TZA and closed above that on Monday. If we find momentum through this level… it would be worth trading. Watch how this trades on Tuesday.

Energy (ERY) expanded the downside again as crude oil touches below the $85 level intraday and closed right on that mark Monday. The sector has fallen off the cliff and the downside is accelerating? how much lower does it go? That is a guessing game I don’t want to play, but I would have my stops in place on all short positions.

Semiconductors (SOXS) The downside has been building gradually and the acceleration on earnings warnings on Friday put a big dent in the sector. More selling on Monday losing 2.1% in trading. Nearly a 9% decline in the index would beg for a bounce, but I am not willing to catch that knife. Watch for the index to find support before doing anything on the buy side.

Biotech (BIS) the one positive sector with hope of leadership dropped 2% on the day and broke support. Does the downside accelerate to play catch up with the others on the downside move? Short trades are gaining momentum and the trade is worth considering as the downside plays out across the indexes.

Watch:

Gold Miners (NUGT) gold bounced of the lows on Thursday, held Friday, and rose Monday… inching higher, but the move on Monday hit short term buy signals from our view. The reason… weaker dollar as the euro bounced on the move higher globally. The miners bounced back from the selling as well with the upside of interest if the push higher in gold continues. The miners are oversold relative to gold prices.

Current EGG:

The momentum is on the downside. The acceleration in the NASDAQ on Friday would lead you to believe a bounce is in order. However, that is a guess and not enough information in the charts or otherwise to warrant the risk of that trade. The downside is extended and risk is high for that side. We will watch today and see how this unfolds short term.

Considering the trades in gold miners and short biotech. Need to see how this unfolds in the morning… I will update the table based on what unfolds.

IF you added the QID post from last week the stop needs to move to $48.40. Target hit on the post and taking a 1/3 or 1/2 off would be prudent on the trade to lock in some profit.