Market Chops Down and the Naz Goes Kicking

Traders continue to fixate on Oil and Financials as the pre-market futures reflect a soft open. Monday morning is shaping up to be a pause before the next move. There isn't any really big news for traders to digest, although Oil is up a little this morning, perhaps on a pause of its own after the huge one-day drop on Friday. Also, in Financial news, the Columbian Bank and Trust Co. of Topeka, Kansas collapsed amid bad real-estate loans.

So there you have it, the same story part five million and three, Oil and Financials, Financials and Oil, and some more Oil and Financials.

9:30 am MT: The market is staging a significant reversal from Friday, especially on the Naz, which is almost in a Kicking Pattern today. Very ugly price action for the Bulls. I’m looking at picking up puts on the major indexes. It looks like the first resistance of the Wedge line is holding. Oil isn’t helping out with any kind of serious selling, so the market just can’t catch a tailwind.

I stopped out of the AMZN calls for a total loss of $459. Today is starting out much like last Monday for me, the market is going against my grain.

9:50 am MT: I picked up some puts on DIA, SPY, and especially the Q’s. About five minutes later the market took another leg down. I think you can stick a fork in the Friday bounce, it’s unlikely the market comes back today.

10:10 am MT: The drop was so fast and sharp that I sold most of the three puts. I made .25 cents or 5% on SPY. I made .40 cents or 10% on DIA. And I made .13 cents or 5% on QQQQ. So I picked up a quick $247 and got out. I will look to buy back some of the puts on any bounce in the next hour or so.

11:00 am MT: I picked the Q's puts back up for a cheaper price. I will probably hold this second set of Q's puts overnight and see if the market follows through to the downside tomorrow.

4:00 pm MT: Market Wrap: The market chopped down the bullish bounce from Friday and then some. Volume was extremely light, but price action to the downside was sharp and deep. Market Bulls look like they are not ready to do much of anything, and they may be getting queezy. There wasn't a whole lot of conviction on the Dow and SPX during the Wedge/IT uptrend for the past month anyway, but now the Bulls are caving in a bit. If the market snaps down another day or two, then it could be headed for a test of the July lows. Oil didn't do much, but the problem was that it didn't help either. I speculated that a drop to $112 - $112.50 would bump up the market today. But Oil had a one-day consolidation and was a non-factor today. That left the Bulls to focus on all the things they didn't like, and evidently they don't like alot.....which isn't all that surprising considering our current macro-economic conditions.

Here is a chart of the Dow showing how the index turned away from the lower side of the Wedge (turquoise line) and looks headed towards support around 11,200 (orange lines)
(click on image to enlarge)

Here is a chart of the Naz showing how the index turned away from the 200dma/10dma cluster and threw a Bearish Kicking Pattern variation today. The index is likely headed to the 50dma in the 2,340 area:
(click on image to enlarge)

I am still holding the Q's puts and I will look for SPY and DIA puts again tomorrow. If the Dow bounces up much beyond 11,500 then I'm stopping the puts because a move above that level would be too many headfakes in just a few days. If that happens then I will switch to Chop and Slop mode and play swings on the 30m to 60m charts.

Personal Note: I will be posting fairly lightly this week and into Labor Day since it is my last week to get a lot of necessary things done before September is upon me. I will get the posts open, and I will do summaries, but I need to prioritize some important things this week so that I am ready for next month. Today was more than I was intending to post, but it was a key reversal day, so I wanted to get the info out to all of you.