ONE EGG Scan for October 3rd

Aggressive selling early today, rebound into positive territory and closed unchanged… that defines a market without direction. As a follow up to a sell off on Wednesday, investors spent most of the day fighting back from more selling to start the day. This brings us to Jobs Report Friday which promises to only add to the excitement of the current trading environment. Plenty to watch and not the least of which is a follow through on the downside. 1910 remains our target on the S&P 500 index and we will see how this unfolds tomorrow.

Russell 2000 Small Cap index bounced nearly 11 points today and back above the 1090 support that was broken on Wednesday. The oversold technicals on the index validated the bounce, but I still want to see how this unfolds near term. Look for some consolidation near this level and then a decision on direction as we go forward.

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.

Tomorrow is the jobs report and we will look to see how it impacts the start of the trading day. Look for our trading notes prior to the open tomorrow.

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

Welcome back to the¬†intraday volatility today… closed with a doji heading into Friday.

Volatility index (VIX) climbed to 18 in early trading and reversed to close at 16.1 on the day. The move equals the August move relative to the volatility and fear. However, this is not likely the end as we have earnings, the FOMC end to QE and global weakness still weighing on the markets going forward. Watching for the opportunity in the pullback or test of this move.

Semiconductors (SOXS) the downside accelerated Wednesday as the index broke support at 632 and closed at 623 near the next level of support. Thursday that broke and tested the 608 support level and bounced to close at 619 on the day. Is the worst over? Is the next stage of the move to bounce back to the 635 level? Watching to see how it plays out short term.

Energy (ERY) short energy trade working well also (Pattern Trading Model) holding steady with little movement. Accelerated Thursday and gave new entry to add to the position at the $16.35 mark. spiked above $18 in early trading and took 1/2 off and holding the balance with a stop at $17. Watching to see how energy unfolds as the price of crude continued below the $90 mark again to $88.18 and bounced back to close at $91.45? ¬†Go figure…

Emerging Markets (EDZ) downside still in play and stalled today as the sector held on to the $40.75 support (EEM). helping was the move higher in VNM up 1.7% on the day. Watching to see if this can hold support and create any upside bounce opportunity.

Treasury bonds (TMF) reversed the buying on Wednesday with some selling on Thursday (TBT rose 1.7%). The ECB provided a reason for bonds to test lower again, but we expect more volatility on both the up and downside of interest rates.

Russia (RUSS) sellers return to the downside trade. Small reversal on Thursday and stop pushed to $14.93 on the move.  Nice push on the upside and willing to accept profit on trades if this test and bounces off the lows.

Small Caps (TZA) short trade working well (Pattern Trading Model). As stated above the 1% bounce in the sector (IWM) was a positive for the oversold sector. Sold 1/2 at $17.35 and stop on TZA is $16.50.

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. Treading water the last two days as gold holds steady.

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. Reversal from selling on Thursday exit on reversal and now looking at how this will unfold short term. Not interested in the volatility of pricing.

Healthcare (XLV) broke support at the $63.50 level and tested lower. will it now bounce short term and then sell lower?

Basic Materials (XLB) confirmed the downside short trade today as posted this morning. watching as the afternoon buyers put the reversal in play short term.

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

Current EGG:

Still watching the short NASDAQ trade setup, but also looking at how the overall index responds on Friday? Do we get  bounce or mini rally in this selling phase? IF so, we would look to short or add the positions in QID on the bounce. Be patient here and let this all unfolds.