ONE EGG Scan for January 20th

The hits just keep coming… despite the US markets being closed, China instituted new margin rules and Shanghai fell 7.7% on Monday. We will have to see how that unfolds on Tuesday here in the US. Europe traded higher on Monday as stimulus seems to be the topic of choice. The question of direction is still the primary issue for the US markets and it is decision time as we start the week. Plenty of work for the major indexes as they look for the catalyst up or down. Friday’s move was a bounce off the key support, but still needs to follow through if we are going to make a upside run. For those reasons we will watch to see how that unfolds… the swings are too erratic to accept the risk that goes with any trades.

Sectors Worthy of Attention: 

Gold miners are attempting to make a break higher as gold makes a follow through move on the upside. The 5% sell off on Wednesday was followed by a 5% move higher on Thursday and Friday confirmed the upside move with a 3.1% gain. 200 DMA overhead and the next focus of our attention on the move.

SPY needs to clear the $204.20 level on the upside to follow through on the bounce or a break below the 198.50 mark would invite the short side trade lower.

QLD needs to clear the $135.40 level on the upside to follow through on the bounce or break below the $127.15 mark to invite the short side trade on a move lower.

Result for the Daily EGG Scan: 

TMF – treasury bonds continued move higher on yields moving lower. Move below $100 would potentially invite a short trade with TBT on the bond… trade only as flight to quality remains a choice for investors looking forward.

XLE – bounced off the lows. Oil bounced off the lows. Need to follow through on upside is this going to offer a short term trade on long side going forward.

SOXS – short side of semiconductors setting up. Bounced Friday… still needs follow through to negative the downside opportunity.

SKF – short financial trade is setting up following the wreck on earnings last week… still needs follow through on downside in banks if the downside opportunity is to follow through.

Markets are still playing the worry game as the uncertainty comes from new sources. Swiss National Bank un-pegs the franc from the euro… China cuts margin on stocks… Europe starting stimulus. The earnings mess did nothing to help. Economic data looks weaker in December. Any wonder the sellers were in control last week. Trading environment as long term views remain a flip of the coin with a bias on the downside. Risk/Reward remains to high on the risk side and willing let the volatility calm some and some confidence return on either side short or long.

TUESDAY: will to open and see how this unfolds following the long weekend. Plenty on the table, but little I am willing to take the risk of trading today.