Market Hangs Tough

Pre-market Futures are down slightly after DE missed earnings. The Naz is holding up, though, after positive earnings reports from AMAT and NVDA last night. Traders are waiting on July Retail Sales and the Oil Inventory Report, both due out this morning. The market is more interested in the price of oil than anything else right now. Oil futures are sitting tight ahead of the Oil Inventory Report, which will come out one hour after the open.

7:25 am MT: Retail Sales came in close to expectations. Oil futures are flat. The market is still looking to open up a little down, which may mean a move to support on the channel on the 60m charts.

7:40 am MT: I nibbled in on puts for BNI, FPL, and GS. I’m sitting on AMZN, which is hanging in there pretty good, and KSS looks like a Rising Three Methods so far. I added a little to KSS this morning. MON is Hammering on the 60m charts, so I’m good over there as well.

8:10 am MT: I sold the GS puts because the stock moved so fast that I had a 1.40 profit, or 16% gain in just a few minutes. I will look to get back in later this morning.

8:20 am MT: MON is fussing around on its 20dma. Since my calls were countertrend, I had a really tight leash. I decided to sell for a small .03 cent gain, so this is a scratch trade and allows me to focus on more on other stocks. I also sold the FPL puts for a small .05 gain, so another scratch. The market looks pretty mixed this morning. I’m pulling in the reigns and focusing on just a few stocks. I just don’t want to be over-positioned in a squishy market.

8:50 am MT: The SPX is coming up on diagonal support. The market may get a little quiet for a bit. Financials and Retail are underperforming.

11:00 am MT: There is a mini-sector rotation going on this morning as traders cover and buy Energy, Commodity, and Gold stocks and sell Financials, Retail, Leisure, Cyclicals and Transportation/Airlines. I’m intrigued enough that I may look at Gold, Steel, Chemicals, Coal, and Energy for quick calls, we shall see.....

I created two Iron Condors, one on DIA and one on SPY. I’m not doing an IC on IWM this month because the pricing is poor for the risk. I would rather have two SPY Iron Condors instead. Here are the two September IC’s: SPY 119/120 137/138 for a net credit of .30 cents with .70 cents of risk, or a potential 43% return on risk. And DIA 106/107 123/124 for a net credit of .25 cents with .75 cents of risk, or a potential 33% return on risk.

3:00 pm MT: Market Wrap: The Dow dropped to the bottom end of its tight diagonal channel. The SPX did the same and bounced back a bit late in the day. And the Naz and the RUT are in a tight, bullish short term consolidations and looking pretty strong. Oil bounced, which put the market down early and mid day, but traders shook off the news and pushed the market up at the end of the day. Something will give eventually between oil and the stock market, but if traders are convinced that any bounce in oil is only a short-term relief move and not a new uptrend, then the stock market will stay more bullish intermediate term. The Naz and the RUT are a lot stronger than the SPX, and the Dow is lagging well behind. The SPX and the Dow are still in too much of a Wedgie for my liking, but that shouldn’t be completely surprising given all the crosscurrent in the market. Remember that Financials and Real Estate are still sloppy, Retail, Leisure, Cyclicals, and Transportation are too dependent on a shaky story (oil going down is good.....but because of a slowing economy and not an increase in supply is bad.....and gas is still around $4.00 a gallon), Tech is not as immune as Maverick and Cougar think it is, and employment is starting to atrophy a little too much.

Our economy is still not in a recession, statistically speaking, and the market was fairly oversold last month, so we are moving up on the Dow and the SPX, but it’s more of a grinding drift than a momentous occasion. The small caps (SML) are the biggest bullish stocks right now, far ahead of the mid caps (MID). Big Tech (NDX) is also a big bullish performer. Those are exactly the areas you would expect speculators to do their most speculating when they are looking for a turn in the market from bearish to bullish. So many segments of the market are steering their way up, some choppy, some trendy, and Energy and Commodity stocks are still trending down. We may see a little mini-rotation because Energy and Commodity stocks got pretty oversold short term, but again, if traders are convinced that it’s only a short term consolidation in the downtrend, then the overall market should maintain its modest to decent bullishness.

Here are some interesting Bullish Movers today, although many of the stocks are still in downtrends:

Gold: AEM, GG, NEM (downtrending sector, but AEM looks like it could still move up to 55.00)

Chemicals: CF, TRA, MON (Monsanto could be coming to life a little)

Steel: CLF, AKS (both these stocks look interesting, and AKS may be changing trend)

Energy: HES, DVN, NOV, WFT, OXY, CVX

Coal: WLT, ANR, FDG

Tech: NIHD, QCOM, (AAPL)

Note: TYC (Ascending Triangle), ILMN may be trying to turn up off a short term Rounding Bottom

Most of the stocks that dropped today in Leisure, Retail, and even Financials did so in a fairly orderly manner. I’m not seeing a lot of chart destruction out there. The market acts like it still wants to stay bullish. As a result, I’m not as interested in Railroads and Utilities as puts today, although it was a very narrow set of stocks I was watching with BNI and FPL. I’m still holding some BNI puts but I may look to exit those tomorrow. I’m also still bullish on Retail and Leisure/Discretionary Spending in the near term, and it will be interesting to see how WMT affects Retail after the company reports earnings tomorrow morning. URBN and EL will add to the Retail focus tomorrow morning with their own earnings reports. As always, oil will be the biggest influence. And more importantly, the question will be: if oil has an expected short term technical bounce (which may have started today), will traders shrug it off as a normal consolidation and not a change in the intermediate term trend? I’m speculating that the stock market will not go intermediate term bearish even if oil has a technical bounce back to the low $120’s. It may take the market down a bit, but I don’t think we will see panic selling unless we go over the $122 area. We shall see.....

One Final Note: I'm caught up on the most recent round of email requests for my Continuation Pattern Search and my Index Watchlist. If you haven't received them yet, and you requested them from me, then you may need to give me another email address. If you don't know what the Referral Program is click on this link: referral program

About the Continuation Pattern Search: The directions include a 10dma but the screenshot doesn't show the 10dma. I will actually run both sometimes. If you want a little tighter, shorter consolidation then keep the 10dma in there. If you want a little wider, longer basing pattern then just use the 21dma and the 30dma. I used the latter most recently (just like the screenshot). But you can use both and check out the slight differences in the results. You can see that this is an easy search to play little variations on when you're looking for slightly different patterns. You really have a lot of versatility with the criteria. I like both combos, but I probably use the 21/30 more than the 10/21/30.