Futures are a bit off their lows down 4-6 handles. We’ve been trying to figure out if the bears have enough juice for any further downside action. Earlier this week they had enough power to break us below the S&P 1698-1702 pivot after we put in an all-time high of 1709. They were able to drive it down to the 21-day around 1684, but yesterday the market opened higher and then rebounded from some early selling in the afternoon to protect that “line in the sand pivot.”
The next few sessions could be important for short-term direction. I think the bears and even the bulls would welcome some corrective activity through the rest of August just to shake things up a little bit. For this to take place, the bears need to keep the market below S&P 1700 and then get a break and close below 1684. If that level were breached, the next one to watch would be 1671.
Despite the barren economic calendar and fact that earnings season is winding down, there has been plenty to do from a stock specific perspective. Everyone is waiting for that September Fed rate decision to see if we get tapering.
VMWare (VMW) was a highlight yesterday, finishing the day up 2.51% as it broke out of the upper level flag pattern and made new highs above the earnings pivot. Holding above $83.50 would show commitment to this recent move higher.
Tesla (TSLA) was obviously a big winner overnight yesterday as it made new all-time highs following an impressive earnings report, but it also provided an intraday trade as it based before trading back through the highs. Elon Musk is now drawing more comparisons to Steve Jobs for the way he is not only brash and innovative, but continues now to top earnings estimates.
Some commodity stocks perked up in a big way yesterday with companies like Freeport McMoran (FCX), Cliff Natural Resources (CLF) and US Steel (X) surging 4.66%. 7.55% and 5.24%, respectively. Even the precious metals bounced, with Gold (GLD) posting gains of more than 2% and threatening the current mini downtrend. Perhaps expectations for QE tapering are lessening.
If you are looking for short set-ups International Business Machines (IBM) is looking like it could break an upper level floor and multi-year downtrend. In the short-term it might be a little bit oversold to chase, but once it works off that condition I think it could see more downside.
Disclosure: Scott Redler is long VMW, MSFT, POT, DDD, YCS, SNDK, EBAY, MCP calls, IBM puts. Short SPY