This was a week that was defined by surprises from China, speculation about the Fed actions with interest rates again (thanks to China), economic data that was not stellar, volatility that took indexes to support and back again, and somehow managed to end the week positive for the week. Go figure! The biggest question looking into next week… is China done? More importantly do the markets/investors believe China is done? That and more will be on the agenda for the coming week of trading.
With that in mind the result of our scans and watch list are outlined below. I am still focused on being patient. As much as I would like believe the storm has passed and opportunity is in front of us, I can’t based on the charts. The trends are still being challenged. The sellers are only a sneeze away from the flu. The buyers are too busy looking over their shoulder for the other shoe to drop. Plenty to watch, more to consider and greater patience is demanded as the risk of the market remains elevated from my view. One day at a time.
NOTE: The following are things to watch and evaluate as we progress forward.
- Biotech (IBB) broke support at $368 and testing support. Testing the uptrend and if it breaks the downside will be in play. We are looking for the downside to unfold and take the trade if develops. BIS entry is $29.
- China (FXI) is a mixed bag of nuts. Yuan news puts the short side on the table again, but has stalled for now. Move above $92.65 on YANG shows a breakout on the short side and continuation.
- Semiconductors (SOXX) broke $87.20 support again and looking for a base to build if this is going to bounce. If the downside accelerates the short entry is $85.30. SOXS $57 entry.
- Dow Jones Average (DIA) Broke support, tested lower and attempting to move back above the $175 resistance. Either side a trade is setting up watching to see which offers the best opportunity.
- Treasury Bonds (TLT) rally as the rates decline on more speculation with China and the Fed. The resistance at the 200 DMA is overhead. The consolidation at this point is holding the upside move off the July lows. If it reverses on belief the Fed doesn’t hike rates TBT will offer a trade opportunity on the short side of the bond.
- Russia (RUSS) short side trade is consolidating and in position to break higher. $42.10 is the entry if the breakout occurs near term.
- Gold Miners (DUST) short miners have found support following the rally in gold last week. The move above $27.20 entry for the trade. $31 target for the trade. High volatility and risk trade near term.
- India (INDA) bounce off support and looking for a move back near the high at $31.50. The entry is $30.65. Technical trade only.
- Telecom (IYZ) break above $29.50 hit entry point. Watching for the follow through and upside to remain short term.
- REITs (URE) upside break higher for short term trade. Watching for entry point near $104 on test.
MAJOR INDEX STORIES:
S&P 500 Index (SPY) 200 DMA and $206.10 are the support levels to watch again this week. Holding above the $208 entry point to add. Stop is $204.40. The triple top is still an issue relative to a ceiling on the index. No direction to speak of and content to see how this unfolds near term. Selling remains a concern and we will watch and manage the stop and the trend.
NASDAQ 100 Index (QQQ) $1o9.10 is support. Break I am interested in downside trade. Hold and we watch. Clearing the 10 DMA on the upside would be of interest near term. Need to let this define a definitive direction then we have interest in ownership.
Russell 2000 Index (IWM) Ugly is the one term that comes to mind for this sector. $118.80 support and holding for now. The downtrend remains in place off the June high. Unless the sector finds some momentum to take the trend out… the downside bias remains. Watching for now.
Volatility Index (VIX) made the move to 13.3 Friday. The volatility has shown up modestly on the selling, but nothing to write home about. No acceleration on the VIX, but there is a worry in the air. More than willing to watch for now.
Transportation (IYT) Moved back to the $148.50 level on sector earnings and testing and holding and testing… . ABCD pattern uptrending channel in place. $150 may be of interest for upside trade, but watching to see how this unfolds near term.
Dollar (UUP) The dollar tested back to support at $25.10 and moving sideways in a defined range. The issues with China had some impact on the movement short term, but the dollar is still holding the upside. The dollar index DXY is sporting a double top and support at the 50 DMA.
Crude Oil (OIL) Crude continues to be downside bias commodity. Broke below $43 level of support on the week and holding near the $42 mark for now. Plenty of anxiety over this move lower, but not much you can say once the speculation trade takes over the directional move. Not interested at this point in time.
Housing (ITB) Nice break from the consolidation on the upside. Investor stuck their noses up at the worries over the Fed hiking interest rates. Test of the $28.35 level would offer a reasonable entry point if it continues to gain momentum. $28.50 entry. Stop $27.70. Uptrend breakout.
Gold (GLD) the metal has been pushing higher as the uncertainty surrounding the yuan and China’s actions. Take it for what it is… a trade opportunity going forward. Hit the entry at $105.65 and that would now be the stop on the trade. Resistance at the $108.40 level ahead. Testing the big move higher to end the week. Break even stop and watching.
Small Caps (TZA) short side of this trade is setting up to be traded again based on the activity the last few days. Entry at the $10.45 level is attractive for the short side trade. HIT entry $10.45. Stop $10.40. Followed through on Friday and looking at how this unfolds to start the week. Rally on for the short side again as the sector cannot find direction. Hold and manage the stops at $10.40 for now.
Crude Oil (OIL) Short trade remains on with the downside in place. SCO at 88.90 entry on renewed selling. Sellers remain in control of the commodity with break below the $45 mark. Stop $100. Selling back… still holding the short trade… I was looking to lock in gains if we held support at the $43 level… that didn’t happen with the move to $42.17 on Friday.
Utilities (XLU) Not an exciting sector, but one that is paying a 3.7% dividend and offers some upside as all the noise around the dividend stocks subsides. Entry $43.50. Stop $43.50. Trending higher and we will watch the outcome.
Real Estate (IYR) REITs moved off the low in June. Hit resistance has inched through the various levels. Still looking for a catalyst to break through the resistance. Entry $74.75. Stop $74.50 for now. Let this unfold and if the rate hike rumors return the downside may return. In need of some upside momentum.
“Vision without action is a daydream… Action without vision is a nightmare.” Japanese Proverb.