ONE EGG Scan for September 16th

Not the best of starts for the trading week as investors exit SOCL, FDN and IWM. The growth story is not handling the threat/rumor of the Fed starting to hike interest rates soon than originally believed. We will know more on the validity of the story on Wednesday at the conclusion of the FOMC meeting. The NASDAQ composite index is the first to take out the initial support levels currently in play and now we watch to see how the others respond tomorrow. Nothing is for certain and the speculation is building on what and how this unfolds near term.

Running the EGG Scans – First the daily winners…

Despite the selling there is still plenty to watch as this week of trading starts on a negative trading day. Still looking for direction short term… patience is better than chasing or speculating. The winners continue reflect the shift in sentiment short term.

Russia (RUSS) the short side is back with downside gaining momentum on Monday. In position to retest the August lows.

Volatility Index (VXX) the push higher in volatility is coming from the selling in the broad  based index. VIX closed above 14 and in position to spike higher is the worries continue to grow. VXN which measures the volatility on the NASDAQ jumped above 16 today on the selling in the index. Watching the VIX for a similar response short term.

Small Cap (TZA) the downside accelerated today with a decline of more than 1% on the index. Not the story we wanted to unfold short term, but now the downside is in play.

Emerging markets (EDZ) sellers have gained some momentum here on speculation a stronger dollar will continue and that is bad for the sector. Watch as this unfolds could offer a trading opportunity.

Treasury bonds (TBT) sellers are accelerating on the speculation the Fed will hike rates sooner than later and with the FOMC meeting this week it is gaining traction. Short trade is worth looking at.

Banks (KBE & KRE) gaining favor as higher rates seen positive for margins longer term. Watching this and we have established positions in other models.

Trade Considerations: 

Energy (ERY) sellers are gaining momentum as the price of crude and natural gas continue to move in a downtrend. That has a longer term implication to the sector if the erosion in price continues along with a stronger dollar. Small bounce for the sector as buyers step in on what they perceive as opportunity.

Solar (TAN) dumped 4% as the advancing stocks in growth sell off. The Fed story is hurting the sector.

Banks (KBE & KRE) broke through first level of resistance and are in position to add to the upside again. Patient with any trades and expect volatility.

SMIN – India Small Cap ETF broke higher and maintaining the uptrend. Thin volume.

DSLV – Short Silver ETF steadily climbing as the commodity falls in price.

Gold miners (DUST) sellers dump the miners as the weakness in gold remains. This trend is gaining momentum as well in both the commodity and the stocks.

Current EGG:

Financials continue to hold the upside and if we are going to take another leg higher they will be a key part of the leadership. As we have discussed a test of $23 was a potential. The entry level for a trade on the upside is $23.50. The setup for the trade is in place and the upside momentum on Friday was a positive. Watch for follow through on the upside and don’t chase in the event of a gap open.

Took the entry for the trade and the news that the Federal Reserve and Treasury Department want the banks to consider reducing their size caused some grief, but the upside is still in play. We remain patient with the this sector as the story unfolds. Watching to see how it responds this week.