Good evening StockBandits!
Stocks never got far from the flat line today after testing both sides of last night’s closing levels. Momentum was completely absent, and instead was replaced with frequent changes of direction as traders remained largely on hold for Friday’s jobs number as well as the ongoing fiscal cliff discussions.
Interestingly, we’ve rallied sharply on positive comments in the past couple of weeks, but so far this week we’ve had both Boehner and Obama come out and refute the notion that headway is being made, yet the market hasn’t sold off. Traders are clearly holding out hope for a resolution, but so far, it still isn’t here. Rest assured that once this is behind us, the focus will shift to something else (earnings season, Middle East, Europe, economy, etc.), but at the moment that’s still the hot topic.
The highs set on Monday remain intact for now, giving us an upside zone to keep a close eye on in the days ahead. Just because we haven’t sold off much so far doesn’t mean the door isn’t still open for further downside. Stated otherwise, there remains plenty of risk in the tape. Stocks are basing for now and may head higher once this rest phase is completed, but the profit-taking could easily intensify so it’s worth noting and keeping risk in check.
I’m sitting on a pile of cash waiting for better conditions to allocate into new trades, and I’m also waiting for the charts to develop further. The short side isn’t offering a lot, and neither is the long side here with the market stretched, so it’s imperative to stay selective until high-quality plays become more prevalent.
Tonight I’m going with the written format to change things up a bit from the usual video. I’ll run through a few of the indexes here first, then share some new plays I’m eyeing for tomorrow’s session.
NAZ – The NAZ continued slightly lower today, finishing about where it started the session (down 4 points). What’s of interest here is that the steep rising trend line was broken today, although follow through will be the key. It’s possible this index is simply basing, but should we see some continued selling, the pace of the pullback could easily accelerate. The data for this index is again quirky today, so I’m using a chart from my trading platform thinkorswim.
SP500 – The S&P finished lower again today, but only by a couple points. That’s not bad given Monday’s downside reversal, but the focal point for this index is also the steep uptrend line from the November low. Next support is 1395.
RUT – The RUT is resting here and today finished incrementally higher. This small-cap index is churning beneath the key 833 level, while narrowly holding above the steep uptrend line. Some additional basing and/or profit-taking would be extremely beneficial for this index after such a sharp move up.
DJIA – The DJIA has thus far failed to reclaim 13040 and now is getting wedged between that level and the uptrend line. The next pullback, whenever it arrives, has a fair shot at resulting in a higher low, but the key will be the character of the pullback and whether the bulls are committed to stepping in ahead of the November low with bids to support price.
VIX – The VIX is worth noting here as it’s beginning to turn back up here. It’s not yet to an important level (which would be seen at recent resistance near 20), but I would expect this index to keep climbing should the broad market keep pulling back.
Plays for Wednesday:
Stocks I’m looking to trade in tomorrow’s session.
CP is facing key multi-week resistance here, putting it on my radar for a possible breakout play. I’ll look to get long if this one can clear the $95 level, as the first push through could deliver a nice pop.
JCI is setting up for another leg higher here after a few days of rest with this minor pullback. A turn up through the trend line at $27.80 will trigger a buy for me as the recovery continues for this stock.
GME is pulling back from its recent high but doing so in a constructive manner. A turn up through the trend line at $26.50 opens the door for a return of strength, possibly a test of the high, so I’m watching that level to get long if cleared.
WPRT is leaning on rising support here and could come under pressure should it break the $26.10 level. I’ll look to short this stock if that occurs on Wednesday, but only if that level is undercut.
C is slowly pulling back and now faces multi-week support. A breakdown here could spark some more intense selling, so I’m watching the $33.90 level for a break to get short for the initial breach of support.
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Trades Overview:
This list is a look at our current & potential swing trading positions. Stocks we are already in have “triggered”, while those we are considering for plays have not triggered. Click post title to view print-friendly link.
No changes
Open Position Notes:
No open positions – 100% cash waiting for new entries.
Closed Positions:
No closed positions.
