ONE EGG Scan September 15th

Sellers exert themselves further on Friday and volatility rose as the speculation on the Fed raising interest rates takes center stage at the FOMC Meeting this week. Choppy markets make for tough trading environments. You can be right about the trade and wrong on the timing as news steps in to drive on any given day. For that reason you have to be patient and let this all play out. Make the necessary adjustments to your strategy and don’t play with fire. Trends are easier than chop… let the trend reestablish itself and then commit your capital. Stay focused and most of all be disciplined in your trading.

Running the EGG Scans – First the daily winners…

Still looking for direction short term… patience is better than chasing or speculating. The winners on Friday reflect the shift in sentiment short term.

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.

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

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.

Rotation is in full bloom currently, but we have to let it unfold as to the sustainability of the trend and shifts in momentum. Don’t over play your portfolio… manage the risk and continue to take what the market offers.

Trade Considerations: 

Solar (TAN) reversed the selling on Tuesday and held the upside trend. Alternative energy is showing solid strength short term. PBW is another clean energy ETF.

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.

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 got a nice bounce again on Thursday and held in the selling on Friday and we continue to look for our original move on the upside from the sector short term. Watching to see how it responds this week.