Good evening StockBandits!
Anxious bulls afraid of getting left behind and squeezed bears both combined for big strength last week as the rebound from the recent lows continued. With the weekend to reflect, however, cooler heads prevailed today as we saw some pretty steady profit-taking kick in.
Today’s slide was a good one, as both camps actually needed it. Bears who were caught on the wrong side of the nonstop bounce wanted relief, while underinvested bulls were rooting for a dip to be able to put more cash to work. The question is, now that we’ve seen a pullback begin, will it still be met with buying interest before the lows are threatened?
I noted here last night that the NAZ could pull back to test the 2600 area, and today we got very close to that mark with the session low coming in at 2606. We did see a minor bounce into the close, but all in all it was a weak day and we could see a deeper dip develop over the next few days.
That wouldn’t at all be a bad thing, as far too many stocks have become short-term stretched to the upside, leaving them in no position to be chased. A pullback will help to provide the two-way price action we need for new bases to build and consolidations to possibly happen, so long as huge gaps are avoided on an overnight basis. Following such significant upside the past two weeks, the odds are fairly high that this pullback could result in a higher low on the daily charts of the indexes. That could bode well into the remainder of the 4th quarter, so while we are still flirting with the ranges it’s important to keep an open mind. This market has digested a ton of bad news in the past couple of months, so it may not take much to see interest rise in stocks once again – particularly if the lows are able to hold.
I’ll run through some notes on the indexes here and then share more thoughts on their charts below, along with the trades I’m eyeing for tomorrow’s session.
NAZ – Nice selloff today to the tune of 2%, still on below-average volume. This index may flirt with 2600 a little longer or it may dip down to test 2555 or the unfilled gap at 2479. Regardless, the rest looks to be starting here so the key is letting it play out without getting overly anxious.
S&P 500 – Steady selling took this index back below 1208 today, and volume remained well below-average. This index has an unfilled gap to 1155 which could get tested if weakness persists, but for now this is healthy rest at the upper end of the range.
RUT – 718 will have to wait for now after a 3.3% decline today. This index had made a huge move and now is attempting to rest, which is positive. The key will be not giving up too much ground on this pullback to avoid a change of character after a big bounce.
DJIA – Gave up 11529 today with a 2.1% selloff, but volume remained light and that’s encouraging for the bulls. This index has an unfilled gap down to the 11100 area, so I’ll watch that level as the next potential stop if today’s weakness continues.
Some additional rest for this market would go a long way for improving charts of individual stocks. There are a ton which have seen impressive price runs, taking them to short-term higher highs, and that sets the stage for potential trend shifts if the next pullback results in a higher low. So at the moment almost everything looks like it still needs rest, and cash is the place to be.
Tonight I’m going with the written format as I know some of you enjoy being able to skim the setups. My notes and trade levels are provided on the charts below.
Please leave your comments and/or questions below if you have any, I always enjoy the interaction.
Swing Trading Candidates:
NONE TONIGHT
Day Trading Candidates:
These are the trades I’m eyeing for potential plays tomorrow. I will not be holding these overnight, and will wait for these levels to be crossed before entering trades. Please see the Day Trading Strategy for more details on how I manage these trades.
The Hit List will not be posted tonight as I am 100% cash overnight and there are no new swing trades for Tuesday. The Hit List typically contains stop and target levels for my swing trades.
