Good evening StockBandits!
The urgency faded on the buy side today as shorts stopped scrambling and underinvested bulls had second thoughts. It seemed there was a collective questioning taking place of what if we do see a sell-the-news scenario? That reined in the buying and instead, we saw a choppy decline in today’s session as traders lightened long-sided exposure with the nearing of the debt deadline.
On the Washington front, the 6-week delay discussed last week changed to Jan 15 for a government re-open and a debt ceiling raise until Feb 7. Senate Majority Leader Harry Reid openly discussed the potential for a downgrade of US debt by credit agencies as soon as tonight (which has happened), while the Senate took a break as the House continued to work on a plan. At the end of the day, however, no deal exists.
Interestingly, the market isn’t in panic mode. Although it would only take one nasty headline to alter that, the fact is that we’ve rallied big off last week’s lows and there’s some breathing room for the major averages here. The rebound may have become a bit overdone or the quick gains became too enticing to book, prompting some profit-taking today. Ultimately though, the picture remains mixed with the NAZ and RUT having each just marked new highs while the S&P 500 and DJIA remain beneath their October highs.
Turning to individual stocks, there is no shortage of messes to choose from at the moment. The swift downside whoosh was quickly undone with a ramp right back up, leaving many charts sporting V-shaped patterns and in no place to initiate new trades. There’s a very high likelihood of movement here in the short term, so it isn’t about opportunity, but rather it’s about risk. The difficulty with establishing positions here pertains to risk, as well-defined exits simply aren’t present on the charts in such a spiky environment. For this reason, I’m continuing to stick with the shortest timeframes as we head into Wednesday’s session.
Let’s get to the charts.
NAZ – The NAZ reached to an incremental new high today as it crossed the recent peak by 5 points before reversing lower on increased volume. This failure at an area of resistance shows respect, validating the highs. Today marks the start of some needed digestion after a quick ramp higher, and there’s ample room on the downside for a deeper retreat.
SP500 – The S&P closed just a hair past 1709 last night but quickly gave it back up today as the blue chips again respected that level. The turn lower came on increased volume, although we’ve yet to see downside follow through. At any rate, this was some healthy profit-taking after a massive rally from the lows last week, and the move still seems overdone given the negative news flow.
RUT – The RUT gave up 1% today to pull back slightly from Monday’s all-time high (the chart below incorrectly denotes Friday). This index still has lots of room for additional profit-taking if worry increases, so I’ll be watching 1063, 1043 and 1036 as key levels on the way back down. On the upside we only have 1090 to watch.
VIX – The VIX spiked by over 16% today and began to fill a gap from the close of last Wednesday which extends to 19.60. This fear index has only registered 3 closes above 20 in all of 2013, but it’s not far from another as of tonight. Historically, the VIX hasn’t reached extremes until it clears 40, so there’s still tons of room for fear to increase.
Notable Names:
WLT is a good example chart to post tonight as a stock which keeps respecting the same level from earlier this year. April, May, and June each respected the $16.25 area as support before it was broken, and after a lengthy recovery the stock has now stopped shy of that same level in September and October. Whenever you see a lateral level, it can prove helpful to extend it on the chart as a test from the other side may eventually come.
YPF is sitting near highs tonight and could see another pop without much effort. A push to $22.40 looks good for a single-day play on the long side for Wednesday, but I’m just not interested in establishing multi-day swings in the current environment due to all the headlines and knee-jerk responses to news out of Washington D.C.
SOHU sold off the recent high then bounced back for a few days to carve out what currently looks to be a lower high. A turn down through short-term rising support at $80.25 looks good for a single-day play on the short side for Wednesday.
YELP failed to reclaim broken rising support on the bounce back up and now is resting on short-term rising support. A break below $67 could spark more selling, so I’m eyeing this one for a single-day play on the short side for Wednesday if that level is undercut.
GMCR just broke multi-month support, tried to bounce, then retreated again today. A new pullback low at $65.10 looks good for a short-sided entry for a single-day play for Wednesday as this stock heads further into the unfilled gap from May.
ALNY saw a big change of character and a partial recovery in recent days but now looks to have stalled out. A turn down through short-term rising support at $58.50 looks good for a one-day trade on the short side for Wednesday, but I won’t be keeping this one overnight either.
New Swing Trade Candidates:
No new swing trades tonight, market volatility and gap-prone nature is preventing my interest in adding overnight exposure here.
Bullish Watch (click for charts)
Bearish Watch (click for charts)
Trade Like A Bandit!
Jeff
