Good evening StockBandits!
As noted last night, I’m on the road this evening but wanted to bring a brief update after such a significant day in the market.
The post-FOMC reaction we saw yesterday left overseas markets reeling in response, which in turn carried over into a weak start to today’s session. No attempt was made to fill the opening gap, and instead we saw a relentless trend day on the downside with the major averages giving up more than 2% each in their worst session of the year. That’s not saying a whole lot, as the downside in 2013 has been quite contained – at least until now.
With today’s declines, we have now exited the trading ranges to the downside on high-volume breaks. The added volume may have been accentuated by this being expiration week, but from a technical perspective it’s significant alongside this break of support. This break also confirms lower highs, and projects on the downside the equivalent of the trading ranges we just left behind. It’s not likely that happens in a straight line, although nothing is out of the question.
Here’s a good look at the S&P 500 tonight after its breakdown. The lower high was confirmed today, as was the downside channel break and the undercut of prior resistance (which was support 2 weeks ago) at 1597. Next level is 1530 on the way down.
The key right now is that the market is most definitely in correction mode and that must be respected. I’m short 2 names tonight (FSLR & TSO) after covering SCCO today at Target 2. Having no long positions was very nice on a day like this, but even if you haven’t raised cash it’s not too late. Just look back 2 summers and you’ll see that the market is capable of swift declines which can leave you wishing you had sold after a decline like this.
Heading into Friday’s session, I’m sticking with existing positions and not looking to add. LYV was negated today without ever triggering an entry, so it has been removed from my Swing list and will be updated accordingly over the weekend.
As for the market, a dead-cat bounce could come at any time after the hammering this market has taken, but I think whenever it arrives (whether it’s Friday or next week) that it’s going to be used for raising cash and not embraced as an upside turning point that will last. Stated otherwise, if you’re looking to trade the bounce on the long side, stay nimble and don’t fall in love. If you get a good move, take it and then get back on the sidelines quickly, because it’s undeniable that the character has changed in this market.
I’m not aiming to be aggressive here on the short side, and would prefer to see a feeble, multi-day bounce which stalls out before adding to short exposure. I think that scenario would offer the ideal plan for getting short, but we’ll have to wait until next week. For now, respect the breakdown and if you’re short, look for spots to lighten and book gains into this very favorable move.
Enjoy your Friday and have a great weekend!
Trade Like A Bandit!
Jeff
