ONE EGG Scan for October 2nd

The selling today confirms the break of support and puts the sell side in control for the near term. Unless there is a big catalyst to the upside not visible currently this is the trend to trade short term. There is plenty of economic data on tap as we conclude September and start the final quarter of the year, but it would have to buck the trend of what we heard today. The only positive news come from the ADP jobs report which showed the sixth straight month of adding more than 200k jobs. That was lost in the ISM manufacturing numbers disappointing and Ford sales falling 3%. With this is mind our comments below to start this week are key to understand. We are looking for the momentum to develop relative to a defined direction… today was the first key step to that taking place. We ran the scans and as you would think the downside is showing the most promise going into tomorrows trading day.

The day-to-day swings in the broad market indexes continue to create a challenge for trading strategies that look longer than 1-2 days. The EGG Scans are not designed to to find day trades, but momentum in sectors. Based on my scans that is not existing currently except in outliers that have elevated risk. They do show up in our scans, but we evaluate the risk of putting our money into high volatility positions in a high volatility market, and take note that if we are wrong the cost or loss is to great potentially to take on the risk of the trade. Simply put, this is not an environment that is conducive to how we trade the ONE EGG Model.

Thursday promises to be interesting as the sellers controlled the day all the way into the final bell. Looking for the short activity to pick up now as a result of the trend breaks.

Running the EGG Scans – First the daily winners/losers…

No intraday volatility today… just a good old fashion butt kicking.

Volatility index (VIX) touched the resistance point of 17.2 and closed at 16.8 on the day. This is a level to watch as it could stall. The index is at support as well and the two could complement each other and test lower before having a climax run on the upside.

Semiconductors (SOXS) the downside accelerated as the index broke support at 632 and closed at 623 near the next level of support. This is set up to test the 600 mark as we progress forward.

Energy (ERY) short energy trade working well also (Pattern Trading Model) holding steady with little movement. Accelerated today and gave new entry to add to the position at the $16.35 mark.

Emerging Markets (EDZ) downside jumps as the Hong Kong issues, Middle East, dollar, etc. unsettle and elevates the risk of the trade near term. Downside firmly in play.

Treasury bonds (TMF) two of the last three days this has been on the top of the scan list. Money is shifting to risk off or safety currently. That trend is gaining renewed momentum. In position to test the high and then we see how it unfolds from there.

Russia (RUSS) sellers return to the downside trade. Big jump on short trade Monday as the global news was nervous and we have continued to follow through as money leaves the sector.

Small Caps (TZA) short trade working well (Pattern Trading Model) Small bounce on Monday and back down on Tuesday with the move towards the key support level at 1090 on the Russell 2000 index.

Downside still worth our attention: 

Gold miners (DUST) as we stated the downside bias remains in play. the short trade is trending higher if you are willing to accept the risk of the trade.

Crude Oil (DTO) was looking like it wanted to go higher, but reversed big on the day to lead the downside charge in price moving back below $92 barrel. Volatility making it tough to trade.

Natural Gas (UGAZ) the long side moved higher short term, but registered another push lower on the day. Long side was looking good, but now we are back on the downside with KOLD as opportunity?

Healthcare (XLV) broke support at the $63.50 level and if it confirms the selling we would look for short trade as well on the sector.

Basic Materials (XLB) confirmed the downside short trade today as posted this morning.

DSLV – Short Silver ETF steadily climbing as the commodity falls in price.$60 stop is advisable on the vertical move now.

Current EGG:

The scans show that the best risk/reward opportunity is the short NASDAQ trade with QID. We posted this last week on the Pattern Trading Model and it has now confirmed the momentum in the sector. $45.45 was the entry point to add on the pattern model today. And that is the point we would like to use on any test on Thursday. Be patient and don’t chase on a gap open if that occurs.