Market Rolls Over

The market wiggled a little out of the gate and then rolled down early in the day. There is no specific catalyst, although the jump in Weekly Jobless Claims to 406k would be the most significant new bit of news. Earnings continue to come pouring in at a rapid pace. The market action is basically playing out as anticipated. The indexes were over extended short term, especially after the Rising Three Methods variant, and we got the 1-2 day additional move that I speculated. Now it appears as though traders are taking some profits. It may be that the shorts have finished covering for now as well. We shall see.....

Watch for diagonal support on the SPX on the short term uptrend channel around 1,262. If the index gets through that area then it could drop to 1,250 pretty quickly.

9:00 pm MT: Market Wrap: The Dow and SPX rolled over in Evening Star Reversals, and the Naz had a Bearish Engulfing. The SPX ran to 1,262 as I warned earlier, and the when it broke down through that area it dropped quickly to 1,251 (I had the target at 1,250). So things played out basically as I warned they might earlier today. There was no real news catalyst, so this is profit taking and the end of the short covering (at least for now). Once the Shorts stopped covering in Financials, and all the bullish bargain hunting ran out of energy, the market rolled over pretty sharply. Some Financials rolled down, but the strongest selling was in Leisure, Gold, Chemicals, and Steel.

Here are some interesting Bullish stocks: AMZN, CELG, and to an extent QCOM. I like how IBM and BAX are holding tough. Also: DHR, LMT, GD, and WHR are in nice little pullbacks.

Here are some interesting Bearish stocks: GILD and TXT may roll over. ERTS, PH, ESV, and MTB all rolled down. SPY and DIA look like they could be good put opportunities for at least part of the day tomorrow, and perhaps for several more days.

It is interesting that a number of Coal and Energy stocks closed well off their lows today:
Energy: BHI, SLB, CHK, UPL, RRC, WFT, XTO, OXY, HES
Coal: WLT, ACI, ANR, CNX

Tomorrow watch for a Hot Potato day. The perfect scenario is a little wiggle up out of the gate to buy puts on SPY, DIA, and several stocks (but not Energy, I don’t want puts there for now). Then if the market sells off through the mid-day, I would look for the Hot Potato as Shorts cover dips and Bulls sell rallies in the last 90 minutes or so. The indexes look like they could be headed for a higher low, but may dip down deeper towards a potential Double Bottom (a test of the recent lows). I speculate the drop down to the recent lows scenario would only be if we get a big bounce in oil prices, or more data that indicates that the unemployment rate is going up.