Another late day rally salvaged what could have been, and looked to be a brutal day. I was looking for a bounce in the first 1/2 hour of the day, and we did have it, but it was very weak looking. Further, we then dropped again, and with that I could tell it was a good day to keep my palms in my pocket. I really wanted to short this thing, and I was very close when we took out the 1130 on the ES. but I never found a good entry, so I stayed put, and thankfully so, the way it turns out.
I probably won’t enter any more trades this week ( probably) but I will still keep on posting some possible setups for those of you not going on vacation. After hours, this mkt. had a decent rally. Tomorrow we don’t have any big e pre or post mkt. We do have crude inventories, so if you are an oil bug you can jump on that bad boy. The way I usually play that is against the first move, especially if it is quick and violent. I look for a slow rally back to where we started the move. Let’s look at some charts:
The VIX bounced as I expected, but it truly did not sustain its early day strength, giving up almost all its post open, post gap gains. Interestingly enough, it close right on the bottom of that broadening pattern. Let’s see if it offers any support, or if we are headed back down to the $16 area.
I see a lot of bottom tails and not a lot of top wicks. Usually that signifies buying into the daily lows, and is often a bullish sign. However, we did fail to make a new high for the first time in 5 days, which is slightly bearish. If we see a hammer or another similar type of signal candle tomorrow, then I think the next day we see or pretty big down day.
Bad tick taken into consideration, the SPX looks set up for a short-term down move here. I could see this dropping to the 1120 area pretty easy from here, and thus dragging the DOW with it.
The RUT is looking similar to the NAS. Something to note, the last two times we had significant down gaps, the very next day was a white candle and a strong rally. Although today’s gap down wasn’t as big, it was still one of the larger down gaps in recent history.
The NAS looks the weakest of the bunch, due mainly to the stocks I mentioned yesterday. However, it did find support on the 20 ma, and last time it touched it had a nice bounce.
The SPY found support on the top of this megaphone pattern. There was a pretty decent v spike with the selling today, if we have v follow through, I think this support gives way.
The QQQQ took out that top of that ascending pennant, but also bounced on the 20 ma. I would imagine this will offer some resistance and we see some more move to the downside here. Maybe not a lot, but some.
No comment, it’s on the chart. Kind of looks like a bull flag though.
ABT looks like it wants to retrace a little before making another run up. A couple of dojis on the top bb and I think we are heading for the $54.50 before making another run.
APOL looks like a bear pennant with decent v and the RSI heading south.
PHM failed to take out the gap and failed to breakdown out of this bullish pennant. I think this is a sign that it will likely breakout to the upside, maybe after another day or two.
The neckline on this loose h&s was taken out today. You can see it sits on the bbb and is very close to the 200 ma. Note how hard the 200 ma has been moving up as EJ seems to be slowly trending down. If it doesn’t take it out this time, I think it will be disposed of on the next test.
In closing: There was strength today, a day which had all the signs of weakness. There is still money on the sidelines, and although it makes no sense to me the mkt. still wants to push higher. I think we are at an optimum point for a minor correction here. The leaders have become laggers and with no real news or e tomorrow, it would be a logical time for this mkt. to drop a little more. There I go talking about logic again!! Trade well and prosper. AKOT
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