ONE EGG Scan for September 19th

Follow through bounce for the broad indexes in response to the FOMC meeting and all is well… right? The mood was positive, but the concerns remain over the direction and focus of interest rates, economic growth and earnings for the third quarter. Housing starts did little to change the outlook as they fell nearly 5% versus last month, the Philly Fed dropped and the weekly jobless claims improved over last weeks blip higher. This just reinforces what the Fed stated in remarks following the FOMC meeting. The uncertainty remains in play and for now we have to proceed with caution.

Running the EGG Scans – First the daily winners…

More follow through on the upside as the FOMC meeting is behind us and we look forward.

Gold miners (DUST) short side is exerting itself as the selling gains momentum once again. Gold and silver continue to push lower and little optimism in terms of the upside returning near term.

Healthcare (CURE) bounced back to a new high and resumed the uptrend. Still a leading sector in the current outlook.

Technology (TECL) Semi’s below was the primary leader in the sector, but the growth side of the outlook is regaining money flow for now.

Semiconductors (SOXL) continued the upside from Wednesday and resumes the upside leadership hitting a new high. The fear related to the growth stocks seems to have subsided with the start of the day as everyone went through the Fed meeting notes and determined it was okay to own the sector again. I have not idea really what they all said, but the action points to the upside for now.

Financials (FAS) nice gain and finding its way higher short term. I still like this sector as it is the EGG currently.

Transports (IYT) broke to new highs on Wednesday and remains a leaders currently. This is a positive for the broad markets looking forward.

As I stated in the market notes… patience and let this unfold.

Trade Considerations: 

Energy (ERY) as we stated the downside pressure remains from my view short term (down again on Thursday). The longer term view lacks clarity as it pertains to the supply and demand. That has a longer term implication to the sector if the erosion in price continues in crude following the current bounce. The stronger dollar remains and any action to hike rates by the Fed will on reinforce the 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. Regained 2.5% the last two days and I like the upside still if you are willing to be patient with the volatility short term. Watching to see how it unfolds.

Banks (KBE & KRE) broke through first level of resistance and are in position to add to the upside again. Now looking at the June highs as the next target. Patient with any trades and expect volatility.

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 as we make an attempt at another leg higher they will be a key part of the leadership. As we have discussed a test of $23 was a potential, but has not materialized. The entry level for a trade on the upside is $23.50 (moved through today). The setup for the trade is in place and the upside momentum is a positive. Watch for follow through on the upside and don’t chase let it unfold.

Making progress with a nice gain on the day and we will take what it gives. Patience as this all unfolds and the broad markets defines direction.