Market Consolidates Ahead of Next Move

Stock market futures are down pre-market as traders appear to be ready to follow through from yesterday's selling. There are a couple of economic reports due out during the day today, but they may not have much impact unless they report shocking numbers, which is unlikely. Big Money Traders look like they are taking a glass is half empty approach so far in September. That means we may see some more technical selling this morning until we reach short term support levels. The next couple of days become important in that if the early September selling doesn't find a floor soon, the market could go in to a donwtrend. I'm still taking the view of choppy or neutral conditions rather than trending conditions until the market shows otherwise.

8:15 am MT: I nibbled on some SCHN and FLR puts. The market is having a quiet morning, which is the wiggle I expected after the big intra-day reversal yesterday. Also, the Oil Inventory Report was pushed back to Thursday due to the Labor Day Holiday. So trading might star quiet for the next several hours. I am also interested in MOS puts but I missed the first early morning wiggle while I was (paper) trading other stocks. If it wiggles one more time, I may pick up some puts.

8:35 am MT: I picked up a very small MOS put position just so I don’t miss anything. It looks very weak right now. I also nibbled on an EL call. I like how the stock is holding up despite the choppy market conditions.

8:45 am MT: MOS did what I thought it would, it went frantic intra-day. So I sold the put for a .50 cent profit or 6% gain in just 10 minutes. I think it will bounce back a little and I can buy the put back cheaper in a few minutes.

9:00 am – 11:00 am MT: I sold SCHN into the big intra-day drop. I also bought back into Steel with some NUE puts. In addition, I sold some of the PXP and FLR puts and the rest of the NE puts. I bought some SWN puts.

1:45 pm MT: I sold the rest of the NFX and FLR puts. I am only holding small put positions on PXP (Energy) and NUE (Steel) overnight. I sold all the rest of the Energy and Commodity puts.

Here are the final tallies on the end of day sells: NFX was a 1.15 profit or 40% gain. NE was a .50 cent profit or 16% gain. SCHN was a 1.20 profit or 23.5% gain. And FLR was a 2.00 profit or 34% gain.

3:00 pm MT: Market Wrap: Today was a consolidation day after the big intra-day reversal yesterday. The Naz had a little more downward momentum than the Dow or SPX. The Naz tested support at the bottom end of the near term consolidation channel. Oil also had a consolidation day, which was a catalyst behind the narrower stock market range. Factory Orders came in slightly better than expected, which continued the trend of decent economic reports the past several weeks. The Fed’s Beige Book showed economic slowing, but there wasn’t anything in the report that most of the trading world didn’t already know. Our economy is doing what it has been doing all year, crunching along. We never reached recessionary levels, but we also haven’t seen growth and expansion. And therefore, the drum beat goes on.....

Here is a chart of the Naz showing the drop to the low end of the near-term channel. If the Naz and the Market hold true to the current choppier conditions, then it's probable that the Naz (and the Market) bounce a little tomorrow. As always, we shall see.....
(click on image to enlarge)

If the market does wiggle up a little tomorrow, or even bounce for a day or two, then I want to start switching away from yesterday and today's Bearish Watchlist by tomorrow. And I want to start nibbling on some potential Bullish Watchlist stocks tomorrow that I sell by Friday. I finished out most of my puts today, and I may complete all the puts by tomorrow. I might also look at some short swing calls tomorrow and into Friday. Again, we shall see.....I want to be ready if it does play out that way.

Here is an interesting list of Bullish Stocks that I will keep an eye on tomorrow:

Retail: EL, TIF, SHLD, BBY, RL, (also interesting but a bit extended are: JCP, KSS, and JWN)

Food & Beverage/Consumer Staples: PG, CL, PEP

Financials: STI, PNC, (also interesting but too extended are: MCO, PRU, )

Transports: FDX is interesting but not a high grade trade

Defense: LMT is interesting but may not be able to hold this angle much longer

Cyclicals: UTX

Also note: MDT, PCP is interesting at the gap, but not a high grade trade, ADBE is holding up well considering what's been happening in Tech.

Now, I don't know what will play out tomorrow because I don't have a time machine....but if the Energy and Commodity stocks look like they want to take one last leg down then I will attack that area with puts intra-day. If the market looks like it wants to bounce up for a day or two, then I will probably attack a few calls from the Bullish Watchlist. We'll see what happens.