ETFs were hard to come by today. The scans produced very little so I had to go out on my own and review manually our ETF Tracker and address current bearish factors in the market.
I didn't include the Emerging Markets Inverse ETF (EUM), but it did come through on today's scans and suits the bearish mood of the market in general.
What I did include to combat negative forces at play is the Inverse for the Technology sector (TECS). This is a risky trade in that it is a 3x inverse. However, I believe today was the beginning of at least a pullback. This ETF could be a good hedge.
Interest rates are on the rise and the Interest Rate Hedge (PFIX) broke out of a long-term trading range. It's made much of its move, but I believe there is more upside in the short term.
One of the scan results that was easy to include was the Ultrashort of Silver (ZSL). With a strong Dollar that is getting stronger, Silver is going to struggle even more than it already has. I see this as another good hedge.
I lightened my exposure to 20% today, but haven't added hedges yet. If I do these will be at the top of my list. I want to see what my indicators say in the DP Alert before I hedge.
Good Luck & Good Trading,
Erin
Today's "Diamonds in the Rough": PFIX, TECS and ZSL.
Runner-ups: EUM, EFZ and KIE.
RECORDING LINK (7/14/2023):
Topic: DecisionPoint Diamond Mine (7/14/2023) LIVE Trading Room
Passcode: July#14th
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When: Aug 4, 2023 09:00 AM Pacific Time (US and Canada)
Topic: DecisionPoint Diamond Mine (8/4/2023) LIVE Trading Room
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Here is the last recording from 7/31:
Welcome to DecisionPoint Diamonds, wherein I highlight ten "Diamonds in the Rough" per week. These are selected from the results of my DecisionPoint Scans which search for stocks that could benefit from the trend and condition of the market. Remember, these are not recommendations to buy or sell, but are the most interesting of the stocks that surfaced in my scans. My objective is to save you the work of the initial, tedious culling process, but you need to apply your own analysis to see if these stocks pique your interest as well. There are no guaranteed winners here!
"Predefined Scans Triggered" are taken from StockCharts.com using the "Symbol Summary" option instead of a "SharpChart" on the workbench.
Stop levels are all rounded down.
Simplify Interest Rate Hedge ETF (PFIX)
EARNINGS: N/A
PFIX is actively managed to provide a hedge against a sharp increase in long-term interest rates. The fund holds OTC interest rate options, US Treasuries, and US Treasury Inflation-Protected Securities (TIPS). Click HERE for more information.
Predefined Scans Triggered: Moved Above Upper Bollinger Band, P&F Ascending Triple Top Breakout and P&F Double Top Breakout.
PFIX is up +2.02% in after hours trading. As noted in the opening, PFIX had a strong breakout. The RSI just moved into overbought territory but that condition can be sustained should this strong rally continue. The PMO is getting overbought. Stochastics are above 80. This is likely to be a short-term trade given overbought conditions are arriving. This one would be great on a pullback but if after hours trading is correct, we may not have that opportunity. I've set the stop below support at 5.7% or $68.02. It can be adjusted higher or lower.
We have a nice basing pattern on the weekly chart. I really like the new weekly PMO Crossover BUY Signal. The weekly RSI is positive and the StockCharts Technical Rank (SCTR) is at the top of the hot zone*.
*If a stock/ETF is in the "hot zone" above 70, it implies that it is stronger than 70% of its universe (large-, mid-, small-caps and ETFs) primarily in the intermediate to long terms.
Direxion Daily Technology Bear 3x Shares(TECS)
EARNINGS: N/A
TECS provides 3x leveraged inverse exposure to a market-cap-weighted index of US large-cap technology companies. Click HERE for more information.
Predefined Scans Triggered: Elder Bar Turned Green, P&F Descending Triple Bottom Breakdown and P&F Double Bottom Breakout.
TECS is up +0.95% in after hours trading. My opinion is that of all the sectors, Technology is extraordinarily overbought and due for a sizable pullback. We are already seeing a rising trend channel on this inverse fund. The RSI is about to enter positive territory and the PMO has surged twice above its signal line. Stochastics have entered positive territory. If the market is going to pullback, this sector will likely take the worst of it. Because it is leveraged and it had such a huge trading day, the stop is set deeply at 10.6% or $12.20.
Not much to say positively about the weekly chart. The weekly PMO appears to be decelerating which is good, but the weekly RSI is in the basement. I think upside potential is near 33%.
ProShares UltraShort Silver (ZSL)
EARNINGS: N/A
ZSL provides -2x the daily performance of silver, as measured by the price of COMEX silver futures contracts.
Predefined Scans Triggered: Entered Ichimoku Cloud.
ZSL is down -0.27% in after hours trading. This was an easy pick. The RSI just moved positive. Price broke out of a nice base and the PMO triggered a Crossover BUY Signal today. Stochastics are rising strongly in positive territory. The stop is set below support at 7% or $17.48. The stop can be set deeper to account for 2x leverage.
The weekly RSI is negative, but the weekly PMO is surging above it signal line. I think upside potential is excellent, but I will say if the Dollar tanks, this ETF should immediately be reevaluated.
Don't forget, on Thursdays I look at reader-requested symbols, click HERE to send me an email. I read every email I receive and try to answer them all!
Current Market Outlook:
Market Environment: It is important to consider the odds for success by assessing the market tides. The following chart uses different methodologies for objectively showing the depth and trend of participation for intermediate- and long-term time frames.
- The Silver Cross Index (SCI) shows the percentage of SPX stocks on IT Trend Model BUY signals (20-EMA > 50-EMA)
- The Golden Cross Index (GCI) shows the percentage of SPX stocks on LT Trend Model BUY signals (50-EMA > 200-EMA)
Don't forget that as a "Diamonds" member, you have access to our GCI/SCI curated ChartList on DecisionPoint.com. You'll find it under "Members Only" links on the left side on the Blogs and Links Page.
Here is the current chart:
Full Disclosure: I am 20% long, 0% short. Considering all three of these hedges.
I'm required to disclose if I currently own a stock I mention and/or may buy/short it within the next 72 hours.
"Technical Analysis is a windsock, not a crystal ball." - Carl Swenlin
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Watch the latest episode of DecisionPoint Trading Room with Carl & Erin Swenlin on Mondays 7:00p EST or on the DecisionPoint playlist on the StockCharts TV YouTube channel here!
NOTE: The stocks reported herein are from mechanical trading model scans that are based upon moving average relationships, momentum and volume. DecisionPoint analysis is then applied to get five selections from the scans. The selections given should prompt readers to do a chart review using their own analysis process. This letter is not a call for a specific action to buy, sell or short any of the stocks provided. There are NO sure things or guaranteed returns on the daily selection of "Diamonds in the Rough."
Regarding BUY/SELL Signals: The signal status reported herein is based upon mechanical trading model signals and crossovers. They define the implied bias of the price index/stock based upon moving average relationships and momentum, but they do not necessarily call for a specific action. They are information flags that should prompt chart review. Further, they do not call for continuous buying or selling during the life of the signal. For example, a BUY signal will probably (but not necessarily) return the best results if action is taken soon after the signal is generated. Additional opportunities for buying may be found as price zigzags higher, but the trader must look for optimum entry points. Conversely, exit points to preserve gains (or minimize losses) may be evident before the model mechanically closes the signal.
Helpful DecisionPoint Links:
Price Momentum Oscillator (PMO)
Swenlin Trading Oscillators (STO-B and STO-V)
For more links, go to DecisionPoint.com