Good evening StockBandits!
They say it’s not how you start, it’s how you finish that matters. That applies to pretty much everything, including the market. Today, we saw a much stronger start than finish as the indexes climbed into positive territory before topping out late morning. From there, it was just a steady slide into the red with a finish at the low of the day.
It wasn’t so much the net losses but simply the failed bounce attempt that is most damaging to the bulls right now. We’re already beneath broken support, so the technical damage took place last week. Today’s decline took the indexes to a new pullback low, yes, but it was the psychological aspect of the weak finish that did the most damage to the bulls today.
We’ve seen a decent pullback now (roughly 3-5% depending upon the index) to current levels from the July highs. That’s certainly nothing to become spooked about, but it has come with a change of character in the past few sessions. Not only did we break support levels, but we’ve seen some follow through and now a failed bounce attempt. That’s very different from the buy-all-dips mentality from late June into early August when a multi-day pullback was totally unheard of, and it’s not something we should ignore at this juncture.
Things could become much worse, that isn’t out of the question. However, this price action has so far been methodical and not the least bit panicky. With that said, it seems a bounce is becoming a greater likelihood. For that reason, the risk now looks to be on the upside as a snapback rally could kick in at any time – especially after the lowered expectations today’s action created. I’m not a big bull here, I simply am stating that waiting for a bounce to remount shorts appears to be the better game plan here as prices become a bit stretched in the short term on the current decline.
Tonight there’s not a lot to highlight, but the setups I’m most interested in are generally on the long side and very short term. I’m content with my current swing exposure but will add to the list as setups warrant. At the moment, what’s available doesn’t look real compelling beyond a quick flip type of trade, so that’s all I’m eyeing for Tuesday’s session.
Let’s get to the charts.
NAZ – The NAZ bounced back toward 3624 today but failed to clear it, stopping 1 point shy of it before reversing lower. This index found support last month at 3573 for a few days, which is the next level to watch should we happen to see some additional weakness before a bounce.
SP500 – The S&P painted its 4th consecutive decline today, it’s longest losing streak since December 28th. It’s still retracing the strongest portion of the July run, filling some minor gaps along the way. The next one is 1640 followed by 1631, neither of which are real important levels though. The bulls are hoping for a snapback rally from oversold conditions rather than finding support at a level since there really isn’t one in this neighborhood. My sense is that we’ll get a far better idea of the resolve of the sellers once that bounce stalls out. First it needs to arrive.
RUT – The RUT filled the 1020 gap today and kept going, and now is coming into the 1008 key level from the May high. It’s getting a bit extended here on the current decline, which could lend reason with lateral support for a possible bounce.
Notable Names:
F is back to test the $16 area after a breakout several weeks ago carried roughly 10% higher and has since then been completely erased. This has the look of a rounded top, so even though it might hold $16 temporarily there are now some short-term lower highs in place that could restrict the upside in the near term.
FDX is actually holding up well here with a high base and could see a breakout attempt soon. Price isn’t yet pressuring upper resistance, but when it does I’ll look at it for a trade. I wouldn’t expect much outside of the recent rhythm of a 1-2 day advance like those of the last couple of months.
GME is also holding up pretty well with a very minor pullback over the last couple of weeks. I’m keeping this on watch for now, but if the descending trend line gets closer to price, a breakout play would become more of a possibility. I like the light volume on this pullback as well, as it indicates very little distribution taking place and rather just some modest profit taking.
CSX is still on my radar for a quick pop, and tonight I’m setting it up for a momentum play for Tuesday if it can clear the trend line at $25.25.
PCYC is trying to turn up here with increased volume and a strong finish, so I’ll take it for a momentum play Tuesday if it can clear $110.50. These momentum plays are single-day plays for me and not swings, so I manage them via the intraday chart to determine relative strength/weakness, stop levels, etc.
PETM is turning up toward multi-week resistance and a breakout at $75.10 could produce a short-term pop. I like it for a momentum play Tuesday if it can break out, but am not expecting a sizeable move so I won’t be taking it for a swing.
SCTY is still looking weak here and still has a couple points worth of room it could decline if it breaks short-term support at $35.20. If that happens on Tuesday, I’ll grab it for a momentum play on the short side and will see if it can stretch its legs down toward the $33 area of next support. The risk/reward here is not favorable for a swing, so I’ll simply look to participate in the next break and then move on.
New Swing Trade Candidates:
No swings added tonight, sticking with existing positions/candidates.
Bullish Watch (click for charts)
Bearish Watch (click for charts)
Trade Like A Bandit!
Jeff
