Pre-market update:

  • Asian markets traded 1.9% higher.
  • European markets are trading 0.8% higher.
  • US futures are trading 0.5% higher ahead of the market open. 


Economic reports due out (all times are eastern): None

Technical Outlook (SPX):

  • Strong 1.15% bounce on Friday, is beginning what is a legitimate market bounce. 
  • Typical bounces, if only a dead cat bounce, following a strong sell-off, will see 2-3 days of very strong buying in the market. 
  • Due to the extreme oversold nature of this market, I would expect that we’d see a heavy short squeeze that takes the market much higher than the bears would anticipate. 
  • Friday’s bounce took place right off of key support as noted below, and also off of the trend-line that dates back to November 2012. 
  • Potential base forming on the SPX 30 minute chart. 
  • Volume was elevated yet again on Friday. 
  • VIX surprisingly only dropped 5.3% down to 15.77. Such a move in the broader market would usually net in excess of more than 10% to the downside. 
  • The market indicators still show conditions to be very oversold still. 
  • What tends to be the biggest obstacle facing the markets currently is the pipeline of bad news facing the market over the last 3-4 weeks. If the news quiets down, the market should be fine. 
  • The sell-off didn’t just begin with the hard sell-off on 7/31. According to indicators like the T2108 (% of stocks trading above their 40-day moving average), stocks have been selling off since the beginning of July, while the overall market was simply consolidating. 
  • As a result, there is a good chance with all the extreme readings that market indicators are providing that we are near a market bottom and ready to bounce higher. 
  • The market doesn’t care about the economy nor earnings. That is not what is driving it. The market only cares about what the Fed is doing to keep equities propped up. 


My Trades:

  • Added one additional long position to the portfolio on Friday. 
  • Did not close out any positions on Friday. 
  • Remain long EBAY at 51.75, GPK at 12.00, AAPL at 95.56, FB at 72.53, WDC at 102.17, NFLX 430.35.
  • 70% Long / 30% Cash
  • Join me each day for all my real-time trades and alerts in the SharePlanner Splash Zone

Chart for SPX:

SP 500 Market Analysisc 8-11-14