World markets are mixed this morning as investors try to figure
out what's next. The signal to pare down some risk on a short
time-frame came when the
(INDEXSP:.INX) couldn't hold 1698 on August 6. The market did have
a gap and go to the downside Thursday, and then hit a natural
target at the 50-day MA on Friday.
Today, futures are hovering around flat line as oscillators are in
the type of oversold territory that we've seen only twice in 2013.
The oversold conditions make it very hard to sit short, but playing
a bounce can also be very tricky. If you are going to look to catch
a bounce, I would use a "Red Dog Reversal" type strategy, which is
a method for buying a stock vs. a level with a plan. A reversal can
sometimes lead to a day-and-a-half move or more, depending on each
SPDR S&P 500 ETF Trust
(NYSEARCA:SPY) has a pivot low from Friday at $165.50 and then your
next point of reference under this is $164.63. The next major spot
is the gap from July 8 that has support at $163.50 and that also
lines up to the 100-day MA at $163.20. If a bounce starts, you have
resistance at $166.63 and then the gap at $167.43.
(NYSEARCA:XLI) showed relative strength after last week's sell-off
in the market, as it's still hovering around the 21-day MA and well
above the 50-day MA. This group hasn't got much volatility as it's
been on a steady uptrend since November 2012. It's trying to build
a base at $44.77 area. Below that, $44.24 is a bigger support zone.
Russell 2000 ETF
(NYSEARCA:IWM) also saw a big gap down on Thursday but is still
holding above its 50-day MA. However, the IWM doesn't look like it
has found its footing yet. Another push lower into the 50-day MA,
which stands at $101.16, could give us a new pivot to trade against
as this is a big support area. This sector could be an avoid until
(NYSEARCA:XRT) was hovering near highs and showing relative
strength during the months of July/August until last week it
dropped below the 50-day following a big gap down. It's struggling
to get back above this key moving average. The longer it stays
below the 50-day at $53.89, the higher the probability it could see
(NYSEARCA:XLF) got hit big and broke below its 50-day MA. It's
struggling around this key moving average. If it can't find a
friend at this $20 level, it could retest the 100-day MA at around
(NYSEARCA:XHB) traded inversely with the market last week as it saw
a strong bounce on Thursday to get back above the 200-day moving
average. It had nice follow-through on Friday but also finished on
lows. This was a good example of a Red Dog Reversal day-and-a-half
strategy. It's currently sitting at the 200-day MA at $28.87. If
dip buyers don't step in at this area, the chances are it could be
a short-lived bounce that could lead to lower prices.
(NYSEARCA:XLU) is a defensive, dividend-oriented sector that
suffers in a rising interest rate environment. The XLU has been
leading the market down since May and experienced another sharp
sell-off last week, which brought it back to retest the 200-day MA
at $37.56. It has bigger support at $35.80 from June 21's pivot
low. Overall, this is among the weakest sectors that need time to
Let's look at what's going on in high beta tech.
) digested the huge move on Tuesday's Icahn tweet, as it continued
to stay above $493.40 level. It was impressive to see this stock
holding up well during the big pullback of the market. We now have
Friday's low of $498.86 as the new pivot to trade against. If it
continues to hold above this pivot low, we could see a quick push
through last week's pivot high of $504.25. The stock has been a
great technical long since it reported earnings. I believe it could
see the $535 area.
) continued to find buyers at the 21-day MA. The stock retested
this key short-term moving average at $251ish on Thursday, then
buyers stepped in at this level early Friday to lift the stock up.
The stock closed well off of lows. It could see some continuation
) entered its earnings gap after gapping down on Thursday's open
then had some downside follow-through on Friday to retest the
21-day, where it quickly met some buyers. However, it couldn't find
momentum above $230 as it hovered in front of this resistance area
for the whole session on Friday. Use this level as the new action
area. This stock needs time.
) showed relative weakness as it broke below the 100-day MA on
Thursday and struggled to reclaim this key moving average on
Friday. Use Friday's low of $856.54 as the new point of reference.
Overall, the action has been bearish and a bit of an avoid since
its outside day in the $905 area
) broke above the downtrend resistance that was in control since
the earnings peak of $158.88 on a gap up on Friday. However, it has
some resistance at $144 area. It held above the opening's gap at
$141 well showing some commitment. The longer it holds above
Friday's low of $141, the higher the probability we could see some
upside momentum above $144.
(FB) also showed some relative strength on Friday, as it saw a big
gap up and held above it. The longer it stays above $36.90, the
higher the probability we could see higher prices in the coming
sessions. A break and close above $37.50 could bring in some
Metals have performed well since making lows on June 28, then gave
us another nice set up on August 14.
Gold (NYSEARCA:GLD) had a nice igniting move on Thursday and
digested very well on Friday even though it ran into some
resistance from the 100-day MA at $133.46. A break and close above
this level could open the door for some upside follow-through. Next
resistance is standing at $136.75.
Silver (NYSEARCA:SLV) showed relative strength as it had a bigger
move and is already well above the 100-day MA at $21.55. It held in
well during Friday's session, showing some commitment. The longer
it stays above the 100-day MA, the higher the probability we could
see some continuation above $22.59. Next real resistance doesn't
come in until $23.70. Above that we have the 200-day MA at
Bonds continue to drift lower, pushing the Inverse
ProShares UltraShort 20+ Year Treasury ETF
(NYSEARCA:TBT) higher. This could be foreshadowing market
expectations that the Fed will taper QE in September, but overall
we have been getting mixed signals about potential tapering.
My game plan today will be to look for some type of bounce, but I
will keep it pretty light. I hope everyone is enjoying their