Good evening StockBandits!
Columbus Day may have closed the banks, schools, and the bond market, but it certainly didn’t shut down the bulls today. Entering the new week with no deal from D.C. over the weekend, futures gapped lower Sunday evening to set the stage for a weak open this morning. Instead of selling off, however, the major averages marked the lows of the session just moments after the opening bell before trending higher for the remainder of the day. The morning gaps were each filled, and by the closing bell the snapback rally which started last Wednesday had delivered another green bar on the daily chart.
Aside from the surprising nature of this spike higher (due to the fact no deal is in place), there’s a bit of a defiant spirit driving the tape higher. It’s as if traders don’t really care about when a deal gets done, that this buying is more of a vote of confidence that at some point it will happen. The October 17th deadline is only a few days away now, although apparently some of those payments can be made at the end of the month. That has given the market a bit more time to expect a resolution, even if it’s only for another 6 weeks (in which case we’ll get to deal with this same scenario again).
The RUT reached new all-time highs today, the NAZ got within spitting distance of its October high, the S&P returned to 1709 for a test, and the DJIA is quickly approaching 15400. The worry of last week seems to have completely evaporated, as seen in the deep VIX retreat and shallow market dips, which means complacency is again running high. That opens the door for another potential surprise. In addition, we’ve now become a bit short-term overbought with this vertical advance off the lows of last Wednesday, highlighting the need at this stage for some digestion and/or profit-taking. Given the sudden mood shifts of just the past 2 weeks, it’s difficult to imagine a boring market going forward until a resolution is seen and some time is allowed for a reaction to it.
Tonight I found it a breeze getting through my watchlist, as there’s just so little out there worth noting. The V-shaped move since last week left many stocks extended on the downside and now extended on the upside, aside from leaving only a handful of bases worth considering for trades. Given the market’s highly stretched condition tonight, as well as the gappy nature of the current environment, I’m going to be very selective with new swings. Instead, for Tuesday I’ll again be focused on intraday plays only.
We have earnings season starting up this week, so it’s a good time for a reminder to bookmark some earnings calendars. I use EarningsWhispers and Yahoo! Finance primarily, in order to avoid any big surprises as quarterly reports start rolling in.
Let’s get to the charts.
NAZ – The NAZ tagged 3816 today, just 3 points shy of the high set earlier this month at 3819. That represents a 166-point rally from the low of last Wednesday, or 4.5%. The closes have been strong since Thursday, but volume declined again today as prices became further extended and resistance was approached. That does not mean a breakout is impossible here, but simply reminds us that short-term timeframes are best in such an emotional, volatile situation like this.
SP500 – The S&P returned to 1709 today, closing a point beyond it tonight. This represents a test of a prior key level, as well as a logical area for a rest to arrive. However, no telling when we get it as everyone is suddenly a buyer. The V-shaped rally will at some point need some digestion, perhaps after some actual good news and not simply a rumor or hope.
RUT – The RUT made a new all-time high in the face of a government shutdown and possible debt default in just 3 days. This index is now up 5.1% from the low of 1037 last week, leaving it very extended and due for some rest. It’s running with some steam here but will cool off at some point and digest this move somehow.
DJIA – The DJIA moved to within 100 points of 15400 today as it painted its 4th consecutive green bar. This index now sits just above the mid-line of this wide trading range of some 990 points.
Notable Names:
FTK is just a short distance from the short-term descending trend line here and a turn up could produce a quick pop. I’m not interested in adding long swings after this market move, so instead I’ll just take it for a single-day play on the long side on Tuesday if it clears $22.70.
MCO is facing a possible breakout here but again I’m not interested in a long swing. A push through $72 could produce a pop, so I’ll instead opt for a single-day play on Tuesday if it can clear that level.
NOV is turning higher here within a high-level channel and could break out any day now. This one looks good for a single-day play if price can clear $80.40 to mark a new high.
PCRX is a little tighter of a setup tonight than last night, although volume still did not pick up today. Nonetheless, price did move a bit closer to resistance so I’ll set up a single-day play for Tuesday here on the long side if price can clear $54.30. I’m more interested in participating in the initial breakout than establishing a new multi-day swing position in such an extended tape that’s so highly news-sensitive.
YHOO is stalling out a bit here and could see some cash get raised if price begins to turn lower to add to this look of a lower high. I like this one for a single-day play on the short side upon a break below $32.60, looking for a possible retreat toward last week’s low.
New Swing Trade Candidates:
No new swing candidates tonight, many charts are extended along with the market and in a highly news-sensitive environment like this I’ve found the shortest timeframes to be the most effective.
Bullish Watch (click for charts)
Bearish Watch (click for charts)
Trade Like A Bandit!
Jeff
