World markets followed US markets to the downside overnight with
Europe broadly lower and the
(INDEXNIKKEI:NI225) standing out negatively in Asia with a 1.5%
drop. The rhetoric surrounding Syria continues to be sharper and
more tenuous. Russia, which has long supported President Assad,
disputes the US claim that chemical weapons were used by his
regime, and basically warned that there will be "catastrophic
consequences" if the US and its allies attacked Syria.
The correction that started with the "taper talk" has intensified
with this geo-political news.On Monday the afternoon sell-off
provided traders some clues to at least take risk off, and
yesterday we got one of the biggest sell-offs of the year. Oil is
also perking up this morning and breaking out a tight channel, and
will be an ongoing worry with tensions focused in the Middle East.
(INDEXSP:.INX) futures are near the flat line. We danced around the
100-day moving average yesterday and closed a bit below it for only
the second time in 2013. Today's SPX pivot stands at 1629. The best
setup, in my opinion, would be a push below this, some acceleration
downward, and then a turn higher later in the day to create some
type of level to trade against.
There is a cluster of support between 1601 and 1626. The June lows
stand at 1560ish, which also is where the 200-day moving average
currently lives. There is some resistance at 1637 then 1645 with a
bigger area at 1653.
Many intermediate-term uptrends have been broken, and there have
been many signs to take down risk well before yesterday. At this
point, be purely tactical until we see a new "signal" that a new
Day No. 1 bounce could be forming. Whatever stock or group you are
trading, note that I trade a level vs. a level for small paper cuts
rather than risking a "gusher" by not using stops.
Today we will check the temperature and map out levels in various
(NYSEARCA:XHB) has been showing relative weakness over the last few
months since the taper talk began, and it showed relative weakness
again yesterday. XHB finished down 2.32% and looks like it could be
close to triggering a bearish head and shoulders pattern. It's
already below the 200-day.
Financial Sector ETF
(NYSEARCA:XLF) has shown concerning relative weakness, which led to
a harsh sell-off yesterday. The XLF finished the day down 2.61% and
closed well below its 100-day MA. It also broke down out of a
steady uptrend that has been in place since the November 16, 2012
market reversal, which is a concern for the sector and the broader
market alike. Use yesterday's low as a pivot at $19.41.
Russell 2000 ETF
(NYSEARCA:IWM) played some downside catch-up yesterday, dropping
2.41% after showing relative strength over the past week. It closed
below the 50-day MA and is hanging onto its pivot from last
Wednesday by a thread. The 100-day is $98.67.
(NYSEARCA:RTH) also shed 1.5% yesterday to retest its 100-day at
$52.76 as there has been lots of weakness in retails stocks. A
break below this key moving average could lead to some downside
action. Next support stands at $51.16; below that we have June's
lows of $50.05.
We will also go over some levels in strong stocks that started to
bend a bit yesterday. These are some of the names we may look to
for bounces if we reach more extreme oversold levels or a "Red Dog
) experienced a sharp 2.86% sell-off yesterday, but is still above
its 21-day MA, which will be the area to watch in the coming
sessions. The $486 price point is yesterday's pivot low and $481 is
a spot for potential action. We will be watching AAPL to see if it
can find its footing leading up to theSeptember 10 product event,
which is expected to bring details of the newest iPhone.
) active traders had another spot to take risk off at $40.60, then
the stock went all the way down to $39.42 near the prior breakout
level and the 8-day. FB could be a candidate to buy on a dip. One
spot to watch for action would be $38.80-$39.30ish and then $38.49.
) held up very well yesterday above $160.25 pivot and remains a
Some weak tech stocks we have been mentioning as candidates for
more downside include the following:
) has also been weak over the past month despite initially
appearing to get another pass from Wall Street after a weak
earnings report. It had a breakout failure, which is never a good
thing. One level for high level stops was $295ish, then yesterday
it had some downside follow through below $285ish from a bear flag
type pattern. Next support is $278ish.
) has shown relative weakness since its mid-level outside day on
August 6 around $905 then broke its uptrend at $885. It had some
follow-through to the downside and closed right near the prior
breakout level ($847ish), and if it can't hold that level then it
could have a date with the 200-day MA ($808).
International Business Machines
(IBM) is one we talked about in my 2013 thesis as a potential
candidate to break a steep multiyear uptrend. The market has
started confirming that thesis since early June. Recently IBM has
been on the short watch list below $191ish. The stock hit a low of
$182.50ish yesterday. I'd be careful here as the macro pattern
continues to show signs of a breakdown.
Metals continue higher, buoyed yesterday by a flight to safety amid
(NYSEARCA:GLD) continued its recent renaissance yesterday with a
0.94% gain and is up again this morning pre-market. We talked about
playing the precious metals for a potential contrarian bounce in
late June, but are not in love with the idea of new longs at these
levels. Money is still on Fed tapering in September, when a loose
schedule could be laid out for wrapping up the program in 2014.
Such a development would rob gold of its biggest bullish catalyst
and likely trigger a sell-off, so I think caution is wise with GLD
(NYSEARCA:SLV) saw a spirited move since theJune 28 lows, and now
it's almost $24ish. I'd use this spot to trim and trail.
Inverse Bond ETF
(NYSEARCA:TBT) couldn't hold the 21day for the first time since
May. Use $76.33 as your actionable pivot, which is where the 50-day
currently stands. If you sold strength around $81 or used high
levels stops as the upper flag broke, this area could be a spot for
you to buy small back.
We are almost 5% off S&P highs but not oversold enough to
blindly buy. Look for potential reversal-type setups, but keep risk
down due to the potentially explosive geopolitical environment.
There has been some technical damage on charts but nothing extreme
-- yet. If you sold SPX 1698 or 1682 or 1666 (all three technical
sell signals) you can embrace the volatility in front of us and
find new areas to enter with a plan.