Pre-market update (updated 9am eastern):

  • European markets are trading 1.0% lower..
  • Asian markets traded -2.2% lower. 
  • US futures are trading significantly lower ahead of the opening bell – just a shade below -1.0%.

Economic reports due out (all times are eastern): Housing Market Index (10am)

Technical Outlook (SPX):

  • Only a slight pullback in the markets on Friday, but today’s gap-down could signify a change in market sentiment today. 
  • I am skeptical of the sell-off that we are seeing so far today. Since overnight’s lows, the S&P futures have already recovered nearly 1/2 of the losses. 
  • Remain bearish until we get the bounce. At which  point, assume that the bounce is going to last and even quickly erase what ever sell-off that came from the previous weakness. 
  • I’ll likely add a short position or two today, but only keep it as long as the market doesn’t bounce. At which point I’ll sell immediately. No need to hold bounces that erase all of one’s gains from shorting. 
  • The nearest  short-term support level for this market lies at 1514. At which point if that breaks, a test of the rising down channel would be in order at 1510. 
  • Expect the VIX to bounce heavily today at the open. Watch for signs of it giving back the gains for signs of a possible upside reversal. 
  • SPX has a difficult time with gap-downs. There is some significant news this time that could assist it in holding the gap-down today though. 
  • Ideally, we are still in need of a more sustained pullback to 1500-1510 level simply for the reason, that it would once again bring stocks back to a place with more ideal setups and opportunities for trading. 
  • Also the amount of margin being used to buy stocks are at levels that historically have led to notable reversals in the market. 
  • We are extremely overbought in the short-term. 
  • Significant bearish divergence on the T2108 as the market is putting in recovery highs, the T2108 (% of stocks trading above their 40-day MA) is significantly lower.
  • Both channels (July October 2012) and the price channel we are currently in are very similar in nature. 
  • We haven’t seen a market pullback in excess of 4% since October/November time-frame. 

My Opinions & Trades:

Chart for SPX:

S and P 500 Market Analysis 3-18-13