ONE EGG Scan for October 15th

Tuesday showed some buyers early and then watched the nice gains fade into negative territory. The difference on the day was more of a drift lower versus aggressive selling. This can be seen as a positive, but we still have to overly cautious as the sellers are still in control. The oversold markets technically are looking for a upside catalyst and follow through. As we a fond of saying patience is the best course of action short term. The sellers will have to be convinced the upside is gaining conviction before they will move to the side. From my view it will have to be a heck of an indicator.

Tomorrow we will look at the set up and see what is worth following through on relative to the EGG trade.

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:

Crude Oil (SCO) dropped 4% on the day and the short trade renewed it’s trend. How much lower does crude go? That is a big question, but the benefits short term are positive for the consumer and the transports.

Energy (ERY) expanded the downside again as crude oil touches below¬†the $82 level intraday and closed right on that mark¬†Tuesday.¬†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.

Natural Gas (DGAZ) joined the selling commodities as it fell back to the bottom of the range and support. More selling to break lower and the short side trade is worth out attention.

Treasury bonds (TMF) the upside buy was back as yields moved below the 3% mark to 2.96%. Fear continues to drive money into the sector despite the potential risk and low yields.

Coffee (JO) back on the list as the move higher on Tuesday pushed the commodity back to a breakout and continuation point for buyers.

REITs (IYR) they are completing a bottom reversal and break higher. The sector sold off on fear of higher rates from the Fed, but that has actually been the opposite. Thus, the buyers are back and the upside entry looks attractive at the $71.60-72 mark.

Not the Scan Tuesday, but still in play from the last week:

Volatility Index (VXX) jumped to 24.4 and a new high on Monday. Tested lower on Tuesday, but returned to close at the highs after testing the support at the 21.5 level. 26.5 would be the next level of resistance. 26.5 would be the next target from here as well if the anxiety to push the downside for stocks continues.

Small caps (TZA) again produced a solid bounce higher from the oversold conditions, but couldn’t hang on the move into the close. Looking at the weekly chart the $19 level is next resistance for TZA and closed at that level again. If we find momentum through this level… it would be worth trading. Watch how this trades.

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. Got a modest one on Tuesday and still watching the downside concerns in the sector going forward.

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. This tested on Tuesday back near the breakout. The reversal entry set up was $13.25. Stop at $12.95 currently. 

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. No big follow through as the dollar bounced back to the upside and kept the metal in check. 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. Tuesday didn’t produce anything relative to a bounce and we continue watch.

Current EGG:

The momentum is on the downside. No follow through on the bounce at this point and the downside is still oversold. One day at a time for now and we will look at how the futures set up tomorrow. Some trade opportunities outlined above and we will keep our eye on them as the day 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. Stop on Tuesday will remain the same following the test lower.