Good evening StockBandits!
Following weekend concerns about the ongoing debt ceiling saga, and the fact that the indexes were still stretched after their early-July run, stocks sold off hard today. A gap down this morning was met with additional selling pressure as dip-buyers shied away, handing the major averages their biggest loss since the June 1st decline.
Today’s slide doesn’t in itself threaten the technical health of this market, although it did serve as a good reminder that stocks do move in both directions. After seeing Friday’s downside gap met with buying, the bulls took that minor dip in stride and likely expected to see something similar today. However, a 30-minute bounce from the opening bell erased only a small portion of the opening gap and actually marked the highs of the session. From there, it was nonstop distribution even though the pace of the selling slowed in the late afternoon.
Volatility continues to run high, despite a VIX reading in the teens. We are still seeing more frequent overnight gaps, as well as wide-ranging days, reminding us to manage risk at all times. Lately that has largely consisted of day trading (to avoid the gap risk), although even when swing trade candidates come along it’s imperative to protect the downside just in case.
As for where this selloff is taking the market, I do not know (or care). As traders, we will continue to see opportunities so long as prices fluctuate, so the key here is to stay attentive and prepare for anything. Clearly, this market is fixated on government actions both here and abroad, and until earnings season gets into full swing, that’s likely to remain the case. I would expect this pullback to result in a higher low (relative to the June low), but there’s no reason to step in at arbitrary levels and just start buying. The best bet is to let things stabilize and start to show signs of recovery before embracing the long side. Until then, event risk remains high.
I’ll cover my game plan for tomorrow in the video, and as always, feel free to share your own thoughts, trade ideas, and questions down below in the comments section.
Here is tonight’s video:
The Bandit Broadcast Video – Click to Watch!
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Video Stocks Discussed: QIHU, RENN, EL, HFC, VIT, ATI, GGC, CREE
Swing Trading Candidates:
NONE TONIGHT
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The Hit List is a separate post which contains discussion on open positions and swing trade stops and targets, so be sure to check it for further details on swing trades.
