Tuesday saw the indices open and remain in positive territory all day long. It’s been a while since we have seen that happen. The gains did slip a little going in to the close and all four closed near their lows of the day.
The Nasdaq led the way with a gain of 0.74% and it was followed by the Dow which moved up 0.50%. The S&P tacked on 0.43% and the Russell gained 0.41%.
Seven of the 10 main sectors gained ground on Tuesday, but none of them gained more than 1.0%.The consumer discretionary sector gained 0.78% as the top performer and it was followed closely by the tech sector with a move of 0.72%.
The utilities sector fell 1.02% and that was by far the worst performance of the bunch.
The consumer staples sector fell 0.15% and the energy sector dropped 0.03%.
My scans were more active last night with 21 bullish signals and 35 bearish signals. That’s the fourth straight night of bearishly skewed results.
The barometer changed little with the somewhat balanced results. The final reading was -22.2, down from -21.3.
With a balanced list to choose from last night, the one trade setup I zeroed in on was a bullish one. The subject of the idea is the SPDR S&P Metals and Mining ETF (NYSE: XME). Because it’s an ETF we don’t have the usual fundamental ratings, but I did look at Tickeron, the artificial intelligence site I use. The XME received a bullish signal yesterday and the past instances show an 89% success rate for the signals.
We see on the chart that a trend channel has formed off the March low. The fund just hit the lower rail of the channel in the last few days. You can also see that the stochastic readings are down in the same area where they were in mid-May, just before the fund rallied from the $17.50 area to $23.76.
Buy to open the August 20-strike calls on XME at $2.45 or better. These options expire on August 21. I suggest a target gain of 100% for this trade and that means the fund will need to reach $24.90. That level is higher than the high earlier in June, but it won’t be up to the upper rail in a few weeks. I recommend a stop at $20.50.
— Rick Pendergraft
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