Good evening StockBandits!
Worry over a government shutdown prompted futures to open lower Sunday night and they never improved until after the opening bell for stocks this morning. We saw a 1% gap lower to kick off the week, but the lows of the session were set in the opening minutes of the day. From there, we saw some short-covering take place which actually brought the RUT positive by the afternoon, although the other averages simply saw partial recoveries. As the final hour of the day approached, however, nervousness set in again and stocks moved south into the closing bell.
Historically, a government shutdown hasn’t proven to be necessarily a bad thing for the markets, but right now it’s probably more about uncertainty and disgust with politicians than anything else. Being the final day of the 3rd quarter, stocks limped across the finish line after a pretty solid performance overall. During Q3, the NAZ led the way with more than a 10% gain, with the RUT gaining over 9%, the S&P over 4%, and the DJIA brought up the rear with a minor gain of a little more than 1%. We’ve seen prices slide off their September peaks, mainly in the senior indexes (S&P 500 and DJIA), and there was a sense this morning that the gap down could prove to be some exhaustion. With the weak finish and perhaps no further progress today ahead of a midnight shutdown, we could still see some downside continuation.
This sort of situation makes for some very tricky trading. We have mixed performance with the NAZ and RUT each holding up rather well lately while the S&P and DJIA have each underperformed. We have some pullbacks which are looking ripe for a bounce, but quarter-ending (and quarter-beginning) games proving to be a cross-current. And we have Washington and headlines related to that which the market is sorting through, all of which makes for a pretty fluid situation that could change dramatically at any moment. If ever there was a time to stay focused and flexible, it’s now.
Sticking to the charts, there isn’t a lot that’s noteworthy tonight. I’m sticking with short-term plays due to the news-sensitive environment we’re in right now but as higher quality patterns and opportunities surface, I’ll consider them as well.
Let’s get to the charts.
NAZ – The NAZ recovered quite well off its early low today with an intraday uptrend which lasted until mid-afternoon. Prices softened a bit late in the day, but overall the damage was certainly contained and this index remains within spitting distance of another new high.
SP500 – The S&P successfully tested the 1671 area today, getting within 3 points of that level before bouncing. It’s not out of the woods yet, but this has been an important level for this index which could produce a bounce from a technical standpoint. The persistent weakness of late and the news flow are the other side of the coin, however, which could override the technicals.
RUT – The RUT successfully tested the 1063 level today and bounced 10 points from there into the close to finish less than 2 points off the session high. It’s just 9 points from the all-time high, leaving it range-bound for now but still holding up well. Any deterioration here would likely see a fair amount of selling, whereas a new high could spark another updraft.
DJIA – The DJIA remained weak today with another triple-digit decline. This index isn’t near any key levels tonight, so the two main factors to watch are whether downside momentum is maintained or if instead it’s getting oversold enough to produce a meaningful bounce.
Notable Names:
P is working on a wedge here and getting tighter by the day. It doesn’t look ready yet to move out on the upside, so I’m going to leave it on watch for Tuesday. I’d like to see price and volume start to uptick.
ORLY is nearing the upper end of its $7 trading range and could soon see a measured move to that extent. A breakout would occur at $128.70 and if it happens on Tuesday I like it for a single-day play. That’s due to a swing stop being far enough away that the risk/reward just isn’t all that attractive. Some upper-level basing within the range would set up a better scenario for a swing due to the tighter stop it would create.
KONG is turning up here and looks great for a single-day momentum play for Tuesday if it can clear $13.30. The last run was a 3-day run, so the moves don’t tend to last a long time with this one, hence my abbreviated timeframe. A swing stop would also be quite wide (dashed line).
GPOR is nearing resistance and a breakout at $64.90 looks good for a single-day play on the long side if it happens Tuesday. Here again, a swing stop would be rather far away (dashed line), making the risk/reward for a multi-day play less attractive to me.
FLTX is already in correction mode and after a small bounce and some rest looks to be resuming its decline. Some continuation to today’s weakness sets up a momentum play on the short side for Tuesday, so I’ll be using $37 as a trigger to get short for a single-day play. There was a congestion zone in the lower $30’s from July that price could revisit.
New Swing Trade Candidates:
No new swings tonight, risk/reward profiles for decent setups don’t warrant multi-day entries here. Will list new swings as they come available.
Bullish Watch (click for charts)
Bearish Watch (click for charts)
Trade Like A Bandit!
Jeff
