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We attempted to short the NASDAQ 100 last week and it stop out with the intraday volatility. The scans this week showed the downside plays as the opportunity. I know that is a shock to many of you, but of the top 102 ETFs based on our scans. 68 were short ETFs, 31 bond/fixed income ETFs and 3 long stock ETFs. The market has not broke defined support on the close and the volume on the selling has been sporadic at best. Thus, we are cautious still with the entry on the short play this week.

Manage your entry and don’t chase if we have a negative open on Monday. The chart posts the details for the entry. I gave more room to the exit as it will need some room for volatility short term as the decision is made on the downside direction. Remember this is a volatile market intraday and if you don’t have the stomach for being short, don’t take the trade.

Because of the intraday volatility manage your stops.

The NASDAQ 100 index has ben the weakest link in the pullback currently in play. The negative momentum has carried the index to the bottom end of the current trading range. The break above $31.10 was the trade, but the opportunity is a move above the $32.90 level. I have posted $33.10 as the entry point, but I want volume and negative momentum in the broad market in order to take the trade.

We opened today with some negative, but not the amount I would have expected on the data points. Thus watch and take half a normal position if we ease towards the entry price. If we confirm the break lower on the index we will add to the position.

Be PATIENT!

The test of $14.95 on XLF, SPDRs Financial ETF was worth watching over the last week. The weakness in the brokers (IAI) earnings were the primary drag on the sector. Throw in the concerns over sovereign debt in Spain and you get the rationale for the test of support. The banks are the key to the sectors upside and the earnings overall were positive. Some upgrades, etc show the fundamentals are improving. However, it comes down to sentiment and thus the short term volatility. All that said, looking at the chart below we closed just above the mid-range resistance at $15.50 on XLF on Friday. I am looking for some of the change in sentiment to spill over to the financial stocks and the leaders to regain some of their strength. JP Morgan, Wells Fargo, upgrade to Ctitgroup, some regionals are doing well to add to the upside as well. KRE broke above the mid-range resistance on Friday showing some strength as well. Thus, I am posting the financials as the EGG this week based on our scans.

We will use the leveraged ETF, ProShares Ultra Financials (UYG) as the play the details are posted on the table. The chart below is XLF to show the details of the notes above.

We started with the egg last week looking for short in the S&P 500 and we start this week the same way. Nothing has change except Europe my provide the catalyst.

I am looking for a test of 1340 support this week as the broad market develops a sideways trading range. If this plays out we will short the index with ProShares UltraShort S&P 500 index ETF. This is a leveraged fund and should be managed accordingly.

As we have discussed in the my notes for the last week the investor lacks confidence and this opens the door for the sellers to gain the upper hand short term. Take it one day at a time and manage your stops to protect against the reversal on news. This is earnings season.

Looking for a trade on the Dow Jones Industrial Index with DIA. The table has the specifics on the trade. The chart below shows the trade setup for the entry. The stop is set and will ratchet up quickly is we break higher and the target is a simple move back to the previous high. 1% is the goal on the trade. Don’t overstay your welcome.

Avoid the gap and be patient with the entry.

Monday, April 9th:

Still looking to play the downside move in the broad index. The jobs report on Friday missed expectations and has investors rattled to start the week. The parameters set out on Thursday still apply, we will have a gap down to deal with on Monday. Don’t chase it, let the trade settle into the open and see where is lands. Follow the instructions on the table with the maximum entry price.

The negative sentiment is creeping back into the broad markets. The news from the government jobs report took away the one part of the economic data that investors were hanging their hope on for future growth. The number shows validation to the weaker data points over the last two month. Thus, we have to watch the downside as investor fear rises and selling starts. How much downside risk exists at this point? That depends on how believable the data is relative to slowing growth moving forward. With earnings reports starting this week we will not have to wait long.

You can add China’s CPI data to the list of worries along with the European sovereign debt and Spain to the list of additional worries facing investors. Be patient and don’t let your emotions rule. Define the entry and set your stops.

Thursday, April 5th:

Looking for a trade opportunity on Thursday. This is a trade that may only be for the day. Watch for the broad S&P 500 index to continue lower into the weekend. If the selling accelerates and offers an entry point on the open there could be the opportunity to capture 1% on the downside. The trade is defined on the table. If you don’t like risk or don’t have time to manage the trade throughout the day. Pass on this trade.

Due to the long weekend this may be a day trade for a 1% gain. This is the non-leveraged short S&P 500 ETF. If you want to use leverage there are several options available.

PLAN: Wait until 10 a.m. if the entry price is hit and the negative sentiment is in play take the entry. Set the stop to the low of the trading range in the first half hour of trading. Raise your stop throughout the day. Take the exit in the last hour if the goal is accomplished.

If the trade goes according to plan great… If not – pass and move on to the weekend.

Looking for a trade opportunity on Thursday. This is a trade that may only be for the day. Watch for the broad S&P 500 index to continue lower into the weekend. If the selling accelerates and offers an entry point on the open there could be the opportunity to capture 1% on the downside. The trade is defined on the table. If you don’t like risk or don’t have time to manage the trade throughout the day. Pass on this trade.

Due to the long weekend this may be a day trade for a 1% gain. This is the non-leveraged short S&P 500 ETF. If you want to use leverage there are several options available.

PLAN: Wait until 10 a.m. if the entry price is hit and the negative sentiment is in play take the entry. Set the stop to the low of the trading range in the first half hour of trading. Raise your stop throughout the day. Take the exit in the last hour if the goal is accomplished.

If the trade goes according to plan great… If not – pass and move on to the weekend.

The Russell 2000 Small Cap index is back at the resistance point and attempting to break higher yet again. If we break higher I want to trade the EGG this week in IWM, iShares Russell 2000 Small Cap index ETF. The entry is defined on the table along with the pullback test. If the index opens lower or tests support at the 30 day EMA ($82.17) or the bottom end of the trading range ($81) use the bounce off suppor as an entry point. I like the outlook for the sector this week. If the economic data and build up to earnings are positive the broad markets will continue higher. Be patient with the entry and use you judgement on the play. The chart below shows the support ant resistance points for IWM.

Sunday, March 25th

The scans this week are showing a cautious outlook across the sectors. The leadership remains in place, but is testing the upside momentum. The laggards tested lower last week and in some cases broke current levels of support. The bottom line is we have to approach the week with caution. As a trader we have to know sometimes the best trade is cash. That said, we are looking for the following sectors to make a move.

Energy – broke support on Thursday and bounced on Friday. The question on direction is in play. A move back above the previous support would be positive for the upside plays in the the sector, however a confirmation of the break lower bring the downside into play. I am not inclined to be short the energy stocks short term as the risk remains high on that play. Thus, look for energy to bounce.

Financials tested lower and held on Friday. This is another sector to watch for direction in the broad market. A break lower would bring the downside risk squarely into play for the broad markets. Watch the current risk in the sector.

Housing data was short of expectations putting pressure on the housing sector. XHB and ITB both tested support. Watch the downside plays in those sectors as well.

The upside is in play and that is the direction the scans should show. As stated above there are negative indicators showing up in the scans. Thus, the scans have produced the biotech sector as the opportunity heading into this week of trading. The uptrend in healthcare has been a leader for the broad markets. The biotech sector has tested lower and is in position to break to a new high. IBB, iShares Biotech ETF is the pick. The chart below shows the push back towards the high and the trade will be a break above his ceiling on volume. Be patient and following the instructions on the table.

Monday, March 19th

The EGG rolled over into this week the move on the day was positive. We hit the target on the day and now watch to take money off the table. The Stop is raised to $35.35. Watch the open tomorrow, if positive, take half the position off and keep the stop in place short term. The sentiment remains positive around the sector and we want to let it run as far as possible.

Monday, March 11th

Scanning the market this week turned up some interesting opportunities in light of the current market environment. The chart below of the SOX Semiconductor index represents the best opportunity based on the criteria of the EGG. The test of the February high followed by the bounce from some accelerated selling puts the sector back into play. The S&P 600 index chart looks very similar with a test below support. Both sectors were leaders on Friday showing investors willing to take on more risk again. The play in semiconductors is based on a combination of fundmental and techincal data relative to short term momentum. Be patient with the play and manage your stops as well as the entry.

The chart below of SMH, HOLDRs Semiconductor ETF is being used versus SOXX, iShares Semiconductor ETF for volume purposes. SOXX is a better ETF to benchmark the index, but we want to make sure the entry and exit process goes smoothly. The Entry is $34.50, Stop is $34.10, Target is $35.50. If the momentum continues the upside may be higher, but for now we will start less optimistic.