Pre-market update:

  • Asian markets traded 0.4% higher.
  • European markets are trading 0.1% lower. 
  • US futures are trading 0.3% higher ahead of the market open. 


Economic reports due out (all times are eastern): Jobless Claims (8:30), Producer Price Index (8:30), PMI Manufacturing Index Flash (8:58), Philadelphia Fed Survey (10), EIA Natural Gas Report (10:30)

Technical Outlook (SPX):

  • It’s the first time the SPX has seen three straight days of selling in almost 2 whole months!
  • What is concerning for the bears is that the market bounced some yesterday off of the 10-day moving average. Not a lot but it clearly could not break through it and that 10-day MA along with the 20-day MA has been a launch pad for the bulls to buy the dip off of in the past year. 
  • The SPX has come off of its overbought conditions. 
  • The bears managed to break the rising trend-line off of the 10/9 lows. At this point 1771 seems like a logical target for the bears to aim for. 
  • In nearly every case this year when the SPX has sold off three straight days, it has, nearly everytime, led to additional selling going forward. 
  • Strong uptick in the SPY volume yesterday. 
  • The bears, if they are really planning on making a showing of the recent selling, needs to have a heavy move, ideally in excess of 1% to the downside. Failure to do this makes it very difficult to take any selling that we see seriously, because the pullback will lack any real fear in the bulls. 
  • Always expect the dip to be bought at some point and plan accordingly with any shorts that you may have. 
  • SPX has traded higher for six weeks straight on the weekly chart. 
  • Also problematic for the SPX is the fact that we are trading outside the upper Bollinger Band on the weekly chart. Historically when this happens, particularly after two straight weeks of such, the likelihood for a near-term sell-off increases dramatically. 
  • VIX remained nearly unchanged yesterday at 13.40. Needs a big sell-off if the bears want to sustain this early momentum. 
  • New lower-low in the SPX 30-minute chart. 
  • The 20-day moving average remains as a solid barometer for gauging the direction and health of the market. 
  • Markets don’t care about the economy nor earnings. That is not what is driving them. The markets only care about what the Fed is doing to keep equities propped up. 

My Opinions & Trades:

  • Did not sell any positions yesterday. 
  • Added two new short positions to the portfolio yesterday.
  • I’m careful about the prospects of adding additional long positions in the current market environment. 
  • Wait at least an hour after the market opens before considering a new position today. 
  • Currently 10% long / 40% short / 50% cash.  
  • Current Longs: CHS at $17.30, 
  • Current Shorts:  FFIV at $84.05, MGM at $19.27
  • Join me each day for all my real-time trades and alerts in the SharePlanner Splash Zone

Chart for SPX:

SP 500 Market Analysis 11-21-13