Pre-market update (updated 9am eastern):
- Europe is trading +0.8% higher.
- Asian markets traded mixed/flat.
- US futures are moderately higher ahead of the opening bell.
Economic reports due out (all times are eastern): International Trade (8:30am), Jobless Claims (8:30am), Import and Export Prices (8:30am), EIA Natural Gas Report (10:30am), EIA Petroleum Status Report (11am)
Technical Outlook (SPX):
- The four days of gradual intraday selling has been quite impressive in terms of consistency and steadiness.
- No where in the selling are we really seeing panic. It’s more like a leaky faucet that continues to just drip…drip…drip…
- 1430 was tested yesterday and held as expected. That doesn’t mean though it won’t eventually break. Just held today.
- SPX closed right on the lower bollinger band. Last time the lower BB was tested we saw an eight day move that took us from 1396 to 1473.
- Over the past year, a re-test of the lower bollinger band has been a great opportunity to get long at. Beyond a year, you have last summer’s sell-off that paid no attention to the breach price made on the lower BB.
- What is astounding is that over the past four days, volume has grown increasingly weak. Like what we saw this summer.
- SPX is short-term oversold.
- 50-day moving average is in play at 1425.
- Double-top on the daily chart coming very close to fruition.
- On the SPY, you basically have a bearish island reversal from 10/4-8 with the gaps on day 2 and day 3 in opposite directions and was confirmed by yesterday’s follow-through.
- After Friday’s breakout failure and back below key resistance, it is important to recognize that the market is in a broader market consolidation range. Break of 1430 changes that though.
- Another push above 1465, and ideally above 1474, would be bullish, and possibly lead to some squeezing of the bears.
- This would also create a ‘higher-high’ for the market which would be extremely important and pave the way for a test of 1500.
- Failure to make a new high in the near-term, would be indicative of a topping pattern in the broader market.
- VIX is now trading above 16.
- Fed’s QE3 launch is going to add a lot of buying power to this market and drive more people out of interest-bearing assets and into equities in search of some kind of return.
- One area of concern is the 3 large gaps off of the 6/4 lows that remain unfilled, including 6/6, 7/26, 8/3
My Opinions & Trades:
- Stopped out of PNR at $44.03 from 45.06 for a -2.3% loss.
- Bought GWW at $210.00.
- Bought LMCA at $107.00.
- Shorted CPRT at 27.00
- Remain long AET at $42.12, AAPL at $637.69, VZ at $45.68, SHLD at $54.48.
- Remain short DRC at $52.38
- Stop-loss tightened to $45.80 for VZ.
- Stop-loss tightened to $57.75 for SHLD.
- Track my portfolio RealTime here.
Charts:
