Market Rolls Over

The stock market is set to open in the Green this morning as futures go positive on European trading, Lowe's better than expected earnings, and a slight dip in oil. However, European indexes are up on Energy and Commodity stocks, Lowe's issued mixed forward guidance, and oil is still holding the $110 - $115 support zone that I have been stating for the past week. So even if we get a bump this morning, I'm not seeing a recipe for a big continuation of the short term swing. I will look to sell most of the calls that I have left today, especially if the indexes test their recent highs, and then look for the next idea. If I enter any new call positions later in the day, it will be for quick, short swings.

7:55 am MT: The market gapped and faded right out of the gate, just as I anticipated. I sold the SHLD calls for a small gain. I’m only carrying a small position on AMZN and HOT.

8:15 am MT: Energy and Commodity stocks are on the move. I’m watching AGU, MON, AKS and a few others. In addition, all the other recent bullish areas are seeing profit-taking and selling. I’m interested in puts on PCLN, MTB, STT, and PH. I may not do much today, but I’m watching those stocks. I’m also still bullish on EL, LDK, ADBE, and AMZN for possible short term upswings if the market pullback finds support by tomorrow or so.

8:30 am MT: I nibbled on puts for STI. I also nibbled on calls for AKS, AGU, and MON. I picked up another call on AMZN and lowered my cost basis while still maintaining a very small position.

8:40 am MT: I stopped the last of the HOT calls. The total trade was a small .16 cent loss. I don’t want to hang around with a lot of positions right now in Retail or Leisure, especially with the overall market acting a little squishy this morning.

8:45 am MT: I added a little to my STI puts. Just to give you a little perspective, even though I have five positions, the total contracts are about the equivalent of one full position. I really am just a nibbler today.

9:50 am MT: I culled out MON for a small $40 loss. I’m just not inspired to hold any big positions today. I have a reasonable cost basis on AGU and AKS, and I really like the STI puts.

10:00 am MT: I nibbled on some MS puts.

11:30 am MT: I don’t like how feeble the momentum is on the early move in Energy and Commodity stocks. I stopped AKS for a $332 loss, and I sold AGU for a $21 gain. I’m all gone from the Commodity trades this morning. I’m starting to wonder if the market is going to sell off more across the board today. Be very cautious of long positions right now, the SPX and Dow are right at key tipping points. My best positions right now are the puts, and I may add to them.

The likelihood that the market makes it back into the green today is pretty much over. This is a pretty critical area for the intermediate term uptrend on the Dow and the SPX.

3:00 pm MT: Market Wrap: I warned that the disconnect with oil was beginning on Friday. It continued today as oil dropped but the market also dropped. For the past three weeks, whenever oil has dropped the market has rallied. Financial stocks were in the middle of the souring of the bulls with a Barron’s article on FNM and FRE which suggested that the Treasury may need to re-capitalize the two companies fairly soon. In addition, there was some chatter that the Fed is going to have to pick and choose which Financial institutions that they let go under because they can’t bail ‘em all out.....Nevertheless, I speculate that the majority of the move today was a technical move. I warned that the Naz was at resistance, and that the SPX and Dow were vulnerable because they are Wedging up rather than trending up. I showed on the chart of the SPX yesterday that the most recent bounce on the SPX was NOT like the previous four bounces, and was at risk. Well.....there you have it.....

All the major indexes confirmed rollovers today. The Dow is inching below the IT uptrend support line of the Wedge, and just clinging to the previous low. A drop below 11,400 on the Dow clearly breaks the Wedge. The SPX is inching below the IT uptrend support line of its Wedge, and just clinging to the previous low as well. A drop below 1,270 on the SPX clearly breaks the Wedge. The Naz threw an Evening Star Reversal today which tested right at the previous low and the 10dma today. The Naz also broke back below its 200dma. A break through 2,400 - 2,404 would probably lead to a drop down to 2,365 - 2,385. The RUT also tested right at the previous low, which was also the 10dma. A break below 737 would probably lead to a drop down to 727.

Here are charts of those indexes showing the levels I described:

Here is a chart of the Dow:
(click on image to enlarge)


Here is a chart of the SPX:
(click on image to enlarge)


Here is a chart of the Naz:
(click on image to enlarge)


Here is a chart of the RUT:
(click on image to enlarge)

Tomorrow we get more earnings and economic reports, which will make the market more newsy. But the most critical thing about tomorrow will be whether or not the Wedges hold up on the Dow and the SPX. If we go too deep on all the indexes, then the IT Bullish posture could move back to IT Neutral, we shall see.....