Sam Collins will be on vacation through June 25. Filling in
for him are two other top technical analysts, Chris Johnson
and Jon Lewis.
In a "normal" market, a two-day pullback in stocks is normal. In
this market … it may be a warnings shot across the bulls
The market bowed to the sellers on Tuesday, as poor housing
numbers set the tone for a negative day. The selling took out a few
key technical levels that we'll discuss in a moment. The negative
action took all 10 major sectors lower, with energy (-2.7%),
utilities (-2.5%) and industrials (-2.4%) the worst performers.
Similar to last week's rally, Tuesday's selling took place on
light trading volume as the
SPDR S&P 500
) shares saw only 1 million shares change hands. The light-volume
trading environment is something that traders will need to get used
to as the economic calendar remains light until earnings season
gets off to a start in a few weeks.
On the technical side, the
) moved below three key technical marks.
First, the benchmark index's 200-day moving average. This
trendline, currently at 1,111, has become one of the most widely
watched trendlines lately, meaning that the drop below it (200-day)
may draw the sellers back into the market in force.
Second, the SPX moved below the psychologically important 1,100
level on Monday, making today's market action incredibly important
for the bulls. A move back above 1,100 during today's trading will
prompt the technicians to break out some of the cash that has been
sitting on the sidelines, especially as the quarter's end draws
Finally, the SPX broke below its 10-day moving average. This is
the first move below this short-term trendline since June 9. Again,
it will be key to see the bulls defend this trendline quickly in
order to maintain the short-term bullish conditions that we have
enjoyed for the last two weeks.
CBOE Volatility Index
) popped back to life, jumping more than 8% to an interesting
technical juncture. The "fear index" will start trading this
morning just above 27, a hair below the intersection of its
downtrending 10-day moving average and its upward trending
What does that mean? Well, it makes the 27 mark much more likely
to be a major inflection point for the VIX, meaning that the market
will also see a large move based on the VIX's next move.
After the bell on Tuesday,
Adobe Systems Incorporated
Jabil Circuit, Inc.
) provided positive earnings results and guidance, which should
provide a little fodder for the technology bulls. The
PowerShares QQQ Trust
) is trading just above its $46 level and its 10-day moving
average. (Are you picking up a theme?) Today's trading will get the
boost it needs from buyers as long as these levels hold.
So what's the rub? Today is what we often refer to as a "must
win" technical day. The SPX will trade back to its 1,050 mark
unless today's trading fills the gap from yesterday's
The light trading volume combined with the vacuum of economic
data will create a vortex lower unless the current technical levels
we've identified this morning hold true. Any lack of trading
strength will act as a signal to begin buying put options to
leverage what would be a third trip to the recent
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