The corrective activity intensified around the world overnight. Most of Europe is down around 1%, while Asia is having a tough session with the Nikkei down 2.6%. The Jakkarta, Indonesia index is now off 22% for the year.
S&P futures are actually flat to slightly positive, although I would have liked to have seen an opportunity to buy with futures down 8-10 handles in deeply oversold territory. Even with today’s open, I am more inclined to look for reversal type set-ups to the long-side.
Yesterday the market attempted to go reverse right off the opening, but succumbed to weakness by late morning. Today could be turnaround Tuesday and I could look for a Red Dog Reversal again. The major actionable pivot is SPX 1645 (SPY $164.76). Under this area there are some micro spots, but the next major is the 100day around 1632. This also lines up with the gap from 7/05 AND a Fibonacci Retracement level, so this is a VERY big area to hold moving forward.
Rates are rising and the Fed seemingly moves close to tapering, which is what most are attributing this market weakness to. There could be other factors, like a lack of power from earnings season, valuation fears, etc. but I’ll let the media figure that out while I just watch the price action. When the S&P broke 1698, it was a good time to reduce risk, and then when we broke S&P 1682ish, it was potentially a good spot to reduce it more and get short, if that’s in your arsenal.
The Inverse Bond ETF (TBT) is overbought, so perhaps a pull-back there could help trigger some type of bounce in the indices. The same goes for some type of bounce in the TLT. Rates had only one place to go this year, it was just a matter of timing. The taper talk that started back in June triggered the move.
There’s been a group of stocks acting very well as the markets been correcting that should be on your radar if we bounce, as well as some trying to find some support.
AAPL has been showing impressive relative strength recently. Yesterday it broke above the bull flag from last week to trigger our listed action area long of $504.25 from the Price Point Sheet, and went as high as $513.74. Holding above $504 would show some commitment for some potential upside follow-through. It does look a bit extended on the daily chart so know your time frame.
TSLA had nice continuation to the upside after breaking above the downtrend resistance from August 8th last week. The stock has reclaimed the 8-day. It could see upside follow-through above yesterday’s high of $147.38
AMZN gave us a nice trade for cash flow yesterday when it had a Red Dog Reversal at $284.50 to go as high as $289.56. The stock did see a pull-back in the afternoon but held above the Red Dog reversal entry of $284.50 so there could still be a trade here vs. this pivot level.
FB has seen some nice action to the upside after bouncing off $36 level on Thursday. The stock has reclaimed its 8-day and held in well during the afternoon pull back in the market yesterday. After a three-day move, it’s prudent to take some profits, but the stock has room to $39.32.
GMCR showed impressive relative strength yesterday with 4% of gains. It has reclaimed the support of all key moving averages. Holding above $79 intra-day support level from yesterday could lead to some continuation above $80.40. Next resistance is $82.95 from 2013 high.
GOOG is trying to stabilize, and I believe after a period of weakness this could continue yesterday’s bounce. If it can hold $860ish perhaps it could bounce back towards $880 for a trade.
LNKD also hangs in tough. Holding above $132ish would likely keep this on traders’ radars.
TBT had a nice gap up on Tuesday last week that ignited its recent rally. The ETF just had a nice three-day continuation move. It’s a bit extended from the short-term key moving averages (8- and 21-day) and has some resistance at $83.76. A rest is needed. Use yesterday’s high of $82.75 as the new point of reference.
GLD is hanging in well in front of the 100-day to digest the recent gains. A break above this moving average resistance at $133.22 could lead to some upside follow-through. See if this upper level flag stays intact with support at $131.39. I would think $130ish should hold for this composure to stay intact.
SLV also held above Friday’s low of $22.15, showing some commitment to Thursday’s igniting move. A move through Friday’s high of $22.59 could bring in some buyers. Next resistance is standing at $23.10-23.70. The $21.45ish level is important support.
Over the next two days I will try to tactically trade a bounce in the SPY and perhaps a cute short in the TBT/long in the TLT. I did cover my shorts and now am flexible if the set-up presents itself
Disclosure: Scott J. Redler is long FB, SPY.