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What to Look for Now That 'Ideal' Setups Are No Longer Producing Big Gains

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While the Dow remains above support and Italian and Spanish bonds creep higher, also keep an eye on DUG.

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Despite yesterday's sell-off, the Dow remains above all three short-term support levels we've been watching. Keep a close eye on these levels -- if they begin to fail, it will be time to take even more of a cautious posture.

Under the surface, I've been noticing underlying weakness with ideal setups no longer producing big gains. With this I decided yesterday to book gains in recent names such as Molycorp (MCP) and a small loss in Avalon (AVL), the former looking to have stalled a bit and the later back below the key $3.00 level that interested me in the first place.

Investors should keep an eye on Italian and Spanish bond yields as both are creeping higher today, yielding slightly under 4%. With little change in the economics in Europe these bonds have been off many people's radar for a long time. Should we see further spikes higher in yields, look for this again to take center stage. With this I'm eyeing the UltraShort Europe MSCI ETF (EPV). It is early and I won't chase today's strength in the name but, on a retracement or better setup, I'll enter long looking for more European weakness.

I am still long oil and gas shares ProShares UltraShort Oil & Gas (DUG) and that tactic is starting to work. Like EPV, I wouldn't chase early strength but rather look for this trend to continue and buy pullbacks to rising moving averages.

Trade 'em well today.

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Position in DUG

 

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