Good evening StockBandits!
The headliner move of the day was that of gold as the /YG futures gave up more than 10% today on the heels of Friday’s breakdown (displayed here over the weekend via GLD, the gold ETF). Stocks suffered as well as early weakness prompted by weak Chinese econ. data eventually led to the market’s worst day since November 7th.
The S&P and NAZ each failed their respective breakouts from last week with swan-dive downside reversals off their highs. For the day, the RUT led the way lower with a 3.7% decline. I’ve been noting here for the past few weeks how it had failed to achieve a new high during Easter week while the other indexes pushed past resistance, and then it led the way lower on the early-April pullback. Last week it rebounded but failed to again clear 954, which I also highlighted here. Then today, it sold off hard to mark a lower low, thus confirming last week’s lower high in the process.
Specifics aside, what we’re seeing here is a clear warning signal to raise caution if you haven’t already. I’ve become more selective with trades on the long side, and have added some short exposure over the past week. Today I was taken out of a single long position, yet given the opportunity to book profits on 3 short positions. The naturally-hedged approach paid off nicely on a day like today where there was no safe place to hide, but it could be that we’re seeing the beginning stages of a meaningful change of direction.
It’s too early to determine that for the big 3 indexes (NAZ, S&P, DJIA), but with the second pullback here in just the past three weeks, it’s certainly not something to dismiss. The last time we saw that was December when the fiscal cliff crisis was on everyone’s mind. Now it’s economy-based, and as key earnings reports start to roll in, we’ll see whether or not today’s fears have merit and if the bears indeed now have new life.
Speaking of earnings, tomorrow we’ve got AMTD, GS, JNJ, INTC, KO, YHOO and others which will shine some light on several different sectors. As always, it’s imperative to keep a close eye on the earnings calendar for any positions which are overnight candidates in order to avoid any surprises. I use EarningsWhispers and Yahoo! Finance primarily.
Let’s get to the charts.
NAZ – The NAZ failed its second breakout in just three weeks with an impressive selloff today on heavy volume. Price is coming quickly back into the 3200 support zone, but if that doesn’t hold then 3168 is the next level to watch. Given the proximity of this pullback to the previous dip, it’s hard to ignore the prospects for lower prices in the weeks to come.
SP500 – The S&P also fell back below prior resistance today and now stands just 1% above the primary uptrend line near 1538. Next support below that is 1530 where this index found resistance back in February. Today’s selloff eliminated the gains of last week on heavy volume, pointing to some real urgency on the part of sellers.
RUT – The RUT held the keys to the day but even in general it’s been the one to watch. From the rally off the November low to the first pullback we saw off 954, this index has stood out. Now it has a lower high and a lower low, and looks likely to test or break 894.
DJIA – The DJIA is within spitting distance of 14563, the level which had been resistance just a few short weeks ago. Today’s hard selloff suggests 15k will have to wait, particularly with the weakness in the other indexes.
Notable Names:
GLD is hitting the dirt here (no pun intended) very hard and this is one of those moves to just stay out of the way from. While many may be eager to get long into this decline, the fact of the matter is that it’s best for the dust to settle before committing capital. When emotional moves are paired with margin selling like we’re seeing here (and in silver as well), the moves can carry farther than expected. The measured move out of the multi-month channel projects to $122, but at this pace it won’t take long before we see that level. Continued caution is best.
AAPL is undergoing its biggest test in recent weeks here as it faces the $419 key support level. A breakdown there could cause more capitulation as the correction continues off the $705 high from Sept.
NFLX was curiously strong today with a 1.9% gain, although it finished well off its high. A break of rising support could add credibility to the lower high scenario which seems to be unfolding here, and if so it could bring more downside pressure to this stock which has seen such an impressive run since last fall.
CRM is nearing key support and a breakdown through $161.50 could see a quick return to the $140 area. This stock already has one lower high in place over the past few weeks, and may be in the process of creating another.
NOV is retreating quickly within its trading range here but I’m not interested in buying it as it comes into support. A breakdown could project a move toward $59 ($6), although I’d prefer to see it pause and possibly consolidate before considering a play.
MPC is getting short-term oversold here after a hard multi-day slide, but has no nearby support either. This is similar to many other stocks which look ripe for more selling despite covering quite a bit of ground over the past couple of days. I’m staying patient tonight and not looking to add any exposure due to the lack of quality setups, and particularly the lack of setups which have well-defined exit levels.
New Swing Trade Candidates:
No new swing candidates tonight.
Bullish Watch (click for charts)
Bearish Watch (click for charts)
Trade Like A Bandit!
Jeff
