Energy and Commodities Sell Off on Slowing Economy Worries

Pre-Market futures are down a little on what mainly appears to be carry through from Friday. Watch for the Bear Flag on the 60m charts on the Dow and SPX to confirm to the downside. We may see some selling out of the gate, and perhaps a bit of a down day early in the day. I will be focused on puts intra-day and probably picking up where I left off on Friday. However, with the Fed Meeting tomorrow I probably won't be looking to hold a position overnight.

Here is a recap of my trading day:

Monday: 7:45 am MT: I nibbled in on some DIA, SPY, OI, and BTU puts. I’m taking small positions at first. Normally I would be selling Friday’s leftover puts into the bump down this morning (if I was willing to hold anything over the weekend these days…..), so I don’t want to zig on myself when I normally zag.

8:00 am MT: BTU got so extended so fast that I just sold the puts for a .30 cent profit or 5% gain in a few minutes. If it bounces a little in the next hour I will buy back in.

8:55 am MT: I sold the DIA and SPY puts for small gains. Like BTU I will wait for another intra-day bounce to do it again and see if I can run that into the close. I need a pretty good setup before I get back in because we are getting closer and closer to what I speculate will be tightness ahead of the Fed. Here are the final tallies for the morning: DIA was a .25 cent profit or 6% gain and SPY was an .18 cent profit or 4% gain. Energy and Commodity stocks are selling off, so there may be some momentum plays in those areas today.

12:45 am MT: I sold the OI puts for a small .17 cent profit, or 3.5% gain intra-day.

1:00 pm MT: The Dow and SPX held right on the support line of the Triangles I drew out for you on Saturday and are putting in Hammer-like candlesticks intra-day. Energy and Commodity-based stocks are dropping sharply, which is giving the rest of the market a boost. The selling in Energy and Commodity stocks is probably because traders are thinking we will continue to see slowing in demand and not because of a big jump in the Dollar. So the concerns over a choppy global economy appear to be the catalyst behind the price action so far today. I’m not super excited about a market that goes up because the economy is slowing so I’m not a big call buyer here, especially ahead of the Fed. Also note that CSCO will have earnings after the close tomorrow, which will be a driver in Tech on Wednesday along with residual sentiment left over from whatever the Fed says. So look for a quieting ahead of the Fed until the announcement at 12:15 pm MT or 2:15 pm ET. Then look for activity to pick up into the close and to be volatile again (especially in Tech) on Wednesday morning after the CSCO earnings reaction.

I really didn't get to sink my teeth into the Energy and Commodity puts like I would want to today. Some days work just catches up and swallows the time and focus away from trading, which I'm sure all of you experience. I did finish the day with $240.00, but I left several thousand on the table.

4:00 pm MT: Market Wrap: The Dow and SPX ended up holding the diagonal support line of the Triangle. I sold the DIA and SPY puts right at the support line, so that was a good exit for the day. A drop in oil prices is being named as the catalyst for the selling in Energy and Commodity stocks, but don’t let that completely fool you. The main reason was the continuing concern over slowing global demand which is causing speculators to unload the way the always do, with their hair on fire running screaming through the streets in a crazed panic. Some Commodity stocks like CNX have made a round trip. What took CNX three months to build, took only one month to blow up. The economic reports today actually beat expectations, so once again, I emphasize that the sell-off in Energy and Commodity stocks is based on speculators fleeing because their worried about slowing demand more than some current fundamental issue or any news.

Here is a chart of the Dow showing how it held the Triangle I drew from Friday and Saturday's posts:
(click on image to enlarge)

Here is a chart of the SPX showing how it held the Triangle I drew from Saturday's posts:
(click on image to enlarge)

Here are some Bearish Movers from today:

Coal: WLT, MEE, ACI, BTU, CNX

Manufacturing/Machinery: JOYG, FWLT, DE, CAT, EMR, BUCY (amazing how badly the speculators wanted in and then right back out of BUCY, I always say that our modern trader's freneticism is breathtaking to watch sometimes)

Chemicals: TRA, MOS, POT, AGU, MON, PX, APD

Energy: RDC, SII, PXP, WFT, NE, CHK, ESV, DVN, DO, RIG, RRC, NFX, NOV, XTO, CNQ, FTI, EOG, NBL, ECA, CAM, OXY, APA, APC

Steel: NUE

Copper: FCX

Financials: ICE

Oil Shipping: DRYS, GNK, EXM, TDW

Utils: FE, EXC, FPL, ETR

Note: BG, OI, WFR

Here are some stocks that are still looking ok for Bullish trades, especially on buy signals:

Healthcare/Drugs: AET, HUM, WLP, JNJ

Retail: SHLD, AMZN

Leisure: CCL

Food&Beverage: GIS, PEP, KO

Consumer Staples: PG, CL

Tech/Services: IBM, NIHD, ESRX

Steel: AKS

Cyclicals: DHR

Manufacturing/Machinery: (AG)

Energy: (MRO), SUN

Chemicals: FMC

Railroads: CSX, BNI, UNP, NSC (Railroads are starting to look very interesting)

Financials: (MS, PRU)