Market Caves In on Selling in Financials, Tech, and Oil

Oil is down a little ahead of the OPEC meeting in Vienna this morning as the Saudi Arabian oil minister signaled that the cartel will leave supply output unchanged. This would be especially prudent given the uncertainty over Hurricane Ike, although I'm sure OPEC has their own interests in mind.

As long as OPEC and Ike don't do anything to spike oil, then there isn't much else for the market to focus on today, unless we get more Financial sector news or a news bogey. For now, this morning, the market looks set to carry through a little off the bounce from yesterday.

I was targeting a swing bounce Monday into Tuesday, and I still am. Perhaps we will see a continuation Wednesday, but I'm playing for today and scaling out of most of what I do at the end of the day unless the market looks like it will stay strong or hold up.

8:00 am MT: The market came quietly out of the gate this morning. There are little news blurbs here and there that the elevator analysts are glomming on to, but the real news is that there is no real news. Price action is subdued as the market digests the big move yesterday, so we shall see if the market can punch up a little more today or not. In the meanwhile, several of my trades are on the move.

8:10 am MT: I sold part of the KMB calls for a big gain. I also sold part of the PEP calls for a nice profit. Finally, I stopped out of the PG calls for a small .10 cent loss. I’m watching Financials for another possible move, and I’m going hunting for more stuff to trade.

8:23 am MT: I sold some more of the KMB calls.

8:25 am MT: I sold the last of the KMB calls right into a Shooting Star on the 5m charts. The total trade was a profit of 2.17 or 49% gain from yesterday. I had ten contracts on this one, so I pulled in $2,170. I may do one more intra-day trade on it before the end of the day, we shall see.

8:35 am MT: I was watching Financials for a possible call trade, but they caved in a little too much for my liking this morning. I’m putting them on the back burner for now.

8:45 am MT: I sold the rest of the PEP calls for a .44 cent profit or 23% gain.

8:55 am MT: I picked up some RTN calls on the Straight Flag/Rising Three Methods on the 15m charts. I also grabbed some PEP again for a quick intra-day trade off the Short Flag on the 60m charts. I’m watching NTRS, STI, FDX, JWN, KSS, KMB, RTN, KO, and PEP right now. I like FDX, I may get some of that.....

9:10 am MT: I nibbled on FDX calls.

9:20 am MT: I dumped the RTN calls for a small .05 cent gain. I wanted the Rising Three to play out and instead it’s starting to go all Dumpling Top on me, so I’m going to wait this out and see what happens. I don’t like the Hanging Man on the 60m charts of the SPX, and I don’t like that the market already dropped to the area of the bottom end of the gap from the high on Friday. However, the gap is holding for now, so I’ll keep picking and pecking a bit today.

9:45 am MT: I added a little to the PEP calls. FDX is starting to hold, so I may pick up some more. In addition, I nibbled lightly on STI calls. I’m not super inspired and excited about the rest of the swing we are in, but if the market holds up then I’ll be positioned to make a little more before the end of the day. I’m guessing that the market will drift and squish through the rest of the day until the last hour, so buying will be met with selling and selling will be met with buying. I don’t want to be sitting on too much stuff if that’s the way I see the rest of the day, but I want enough in case we get a little movement later in the day.

10:10 am MT: I nibbled on some KMB calls again on the Bull Flag intra-day. I have what I want for the rest of the day.

10:50 am MT: I sold the PEP calls for a small .01 gain, or basically breakeven. I think it’s going to double back intra-day and I can pick it up cheaper later on if I decide to trade it one last time in the current swing.

1:00 pm MT: I sold the KMB calls for a small .08 cent gain, so basically breakeven. I also stopped out of the FDX calls for a .40 cent loss or 8%, but FDX was only three contracts so it was a minimal loss. In addition, I picked up the PEP calls again for a late day rally.

Oil cracked down to new lows after OPEC ministers said what they had already hinted they were going to say – no output reduction. The bigger news, which of course didn’t make the news, was that Hurricane Ike was downgraded to a Category 1 Hurricane and is not expected to do much damage to people or oil platforms. And since the news is good news it didn’t make the news.....I warned you yesterday (and previously) not to trade the stock market based on what you see come out of the media, and today is yet another prime example. I can imagine how all those traders who went long oil stocks on the Hurricane “headlines” and the Boone T. Pickens OPEC “headlines” feel now about their energy stocks….In fact, based on the way the Hot Stuff Managers were unloading Energy and Commodity stocks today, I would guess they felt a little like Humphrey the Bear.

If you’re not quite sure what I mean, watch this video. When you get to the time area of 1:16 through 1:38, imagine the Hot Stuff Gang running around like Humphrey today trying to dump their losing trades before they keeled over and hurled their guts out.

Bear Hunting Season

The idea with good speculating is to keep yourself disciplined and under control. Here is another example of what not to do.....

Fishing Season

On a related note I bought puts on Energy stocks.....

There is so much carnage over there right now, so I didn’t do much but nibble on puts for NFX and ECA. I also picked up puts on NYX. If the stocks gap down in the morning I will immediately sell the puts. If we wiggle, then I may pick up puts on other Energy and Commodity stocks. But be selective, there are many of the stocks that had extreme selling today.

1:40 pm MT: I sold the PEP puts for another .20 cent gain. My total tally on the day for closed positions was a profit of $2,500. Today plus yesterday gave me a two day gain of $3,334 in the Papermoney account, which is right in line with what I wanted out of what I thought was going to be a Monday –Tuesday swing. As it turned out it was about a day and a half before the sell-off.

3:00 pm MT: Market Wrap: Oil sold off down to as low as $101.77 after Hurricane Ike was downgraded to Category 1 and OPEC left output alone. The selling in Energy and Commodity stocks put some weight on the market’s back, but the relief in oil prices, which lately has been positive for the market. In today’s case, the other problem was that Financial sector trader’s came back to reality after playing with the unicorns and the elves yesterday. I warned that I didn’t think a government takeover of Fannie and Freddie would change anything fundamentally in the Financial sector, and today it looks like the rest of the market caught up to that idea.

You can pretty much throw a dart a Energy and Commodity stocks for puts today, but Financials, Tech, some Cyclicals and other areas rolled over pretty good as well. I stated yesterday that the candlestick on the SPX and Dow should look more like the Hanging Man on the SPY and DIA, so today’s price action didn’t surprise me at all. The Naz looks especially bearish short term and is likely headed towards 2,170 – 2,195. I speculate that 2,195 is very doable tomorrow or Thursday. It’s tougher to get a read on the SPX and the Dow because of the messed up candlesticks from yesterday. The SPX does look like it may head down a little more to the 1,210 – 1,218 area. Remember, this is September, and September is typically a bearish month in the markets

If the market and stocks gap down in the morning then I’m a seller and not a buyer. If we wiggle a bit for most of the day, then I may pick up more puts and see if the market legs down one more time tomorrow afternoon or Thursday. We are coming up on more economic data tomorrow through Friday, so traders could react to those types of news blurbs. However, don’t lose sight of the fact that this is still September, regardless of what you read.....