Bandwagon Rolls Downhill

Pre-market futures are down sharply after the Weekly Jobless Claims report missed expectations and Standard & Poor's lowered its debt rating for the United Kingdom. The Jobless Claims number was 631k vs. 625k, which slightly worse than consensus. S&P stated that net general government debt in Britain could approach 100% of GDP.

In addition to the Jobs report and the S&P debt downgrade, the Fed jumped on the bearish bandwagon after the minutes from the last meeting, released yestereday, showed Fedsters think there are "significant downside risks to the economy." The minutes were, in part, why the market rolled over yesterday, but I just fell off my chair laughing at hilarious news bogey moment #1. Remember, at the EXACT SAME TIME yesterday that the Fed minutes were revealing its dour economic forecast, Treasury Secretary Geithner was appearing before Christopher Dodd and the Senate Banking Committee to let us know that things were stabilizing and getting better.

Now, I'm going to tell you my hilarious news bogey #2, and remember, I'm just the messenger here, I don't make this stuff up, I really don't think I'm creative enough to write this kind of crazy, unbelievable news anyway. Former Fed Chairman Alan Greenspan jumped back in the spotlight today and stated "the banks are still in peril." I kid you not, like I said, I can't even try to make this stuff up.....This is after Greenspan, less than two weeks ago, stated that he sees a bottom in the housing market and the financial sector. You can review my post on May 12 for the writeup.

Waakowwwww!!

Spotlight Ninja Strikes Again!

I'm not sure if Alan thinks we have all lost our memories, or if he's desperate for the spotlight, or if he's just stating both sides of the economic forecast so he can cover his tail. Whatever it is, this current market news environment, and much of the news for the past year and a half, just simply approaches the surreal for me.....

The SPY gapped down about 1.00 point at the open, so another day, another gap. The SPY (market) will probably head towards support at the 88.00 area.

Here is a chart of the SPY just after the open:
(click on image to enlarge)

Nibbling on small put positions shortly after the open is ok. It is even more ideal if the SPY (market) wiggles up a little into the 90.00 area in the next 30m or so for a larger put opportunity.

7:40 am MT: The market is still fighting with the big gap down. Somewhere in here, there may be some dip buyers who wiggle the market back up a little.

7:45 am MT: The market is wiggling up on some dip-buying. Here are some stocks of interest from yesterday's bearish watchlist: MTB, HPQ, NKE, RTH, EMR, FAST, NTRS, PH, T, ACE, RKH, RL, UPS, APC, CVX, WY, BNI, UNP, EXC, MMM, UTX, FDX, DHR, and MDY.

8:00 am MT: Many energy stocks are rolling over on lower highs with Shooting Start reversals: BHI, SLB, XTO, NBL, APA, OXY, OIH, DVN, EOG, DO, XLE. Railroad stocks are doing the same: UNP, BNI. Here are some other commodity / cyclical / other stocks in the same pattern or showing bearish signals: PX, CAT, APD, FDX, UPS, HPQ, EMR, BA, DHR, UTX, FAST. There are a couple of stocks from the 7:45 am list I will keep an eye on, but I like the 8:00 list for bearish momentum this morning.

8:15 am MT: The SPY (market) continues to battle the open. The wiggling has gone as far as 89.80, so not quite to the 90.00 I wanted, but close. The dip buyers may keep fighting between 89.50 - 90.00, but they have a very hard boat to row this morning.

Here is a 30m chart of the SPY:
(click on image to enlarge)

The short term support target for the SPY is the 88.00 - 88.25 area. Going the other direction, a move above 90.00 would be a mini red flag for the bears. A move above 90.50 is likely a drop dead zone for the bears and put positions.

8:25 am MT: The dip buyer boat just got another hole punched through the bottom as the SPY (market) made new lows. The price action looks like it will smack the 89.00 area. I speculate that traders may try to battle on the 89.00 area and create a pause or even a bit of an intra-day bounce around that zone. Any hand-fighting in the pits that brings the market back to the 89.50 - 89.75 area intra-day is just another put buying opportunity. Eventually, the market will probably reach 88.00, possibly today, but just as likely tomorrow. Remember, we have a three-day weekend coming up, so many traders are trying to lock and walk ahead of their holiday plans. We shall see how the rest of the day goes.....

11:55 am MT: So far, the price action is playing out pretty much as I speculated. We did get the hand fighting that brought the SPY (market) back to the 89.50 area (89.46), which was another excellent put buying opportunity. The SPY rolled back over and is now pushing down on support ready to break to new lows and head towards the 88.00 area.

12:07 pm MT: There's the break to new lows. The SPY looks like it has a very good probability of sinking down to the 88.0 - 88.25 support area. At this point, it's ok to take a little of your profits (1/4 - 1/3) from the rollover up in the 89.40 - 89.46 area and bring stops to just above 88.75. If the market is going to continue down to support today, then it should stay below the 88.75 - 89.00 level.

1:02 pm MT: The SPY dropped right to the top side of the support zone at 88.25 (the low price was 88.26). As usual, there were some fast money players ready to take profits and cover shorts right on the price point. Hedgies are a fairly predictable lot once you get locked in on what's stirring their fruit cocktails on any given day.

At this point, I espect some pushing and shoving, maybe even some short covering back into the 89.00 area, but I still think there are too many profiteers out there and the market will probably fade one more time before the end of the day. Obviously, if you locked 1/3 of your profits back at the 88.50 level (the 12:07 pm post), then you wanted to lock another 1/3 of your profits at the 88.25 level just now. And of course we're all waiting for any possible move down to the 88.00 area. We'll see how the rest of the day goes.....

2:10 pm MT: The fundies started some pit-fighting along 88.25 and pushed back up into the 89.00 area as I speculated. There are still enough dip buyers out there hoping for whatever they're hoping for.

This was a good day for puts, and there is still the possibility for another test of the 88.00 area tomorrow, especially if a lot of fund managers decide to lock down some more of their overall uptrend profits ahead of the three-day weekend.