Finishing Ugly
Despite a nasty start to the day and a
lower than expected reading from the Chicago PMI, the averages finished ugly, but
not as ugly as could have been. The problem now, however, is that nothing is
looking particularly intriguing, either from a position or HVT
standpoint. I know of several people who played the move off the lows yesterday,
I was not one of them. Absent that move, the early morning HVT trades
were fleeting and the intraday setups were whipsawed.
Looking under the hood so to speak, the Dow and the Nasdaq did make
multi-year lows intraday, and while they recovered from the worst levels of the
day, a look at some of the large tech components tells a different story. Microsoft
(
MSFT |
Quote |
Chart |
News |
PowerRating), Intel
(
INTC |
Quote |
Chart |
News |
PowerRating), Dell
Computer
(
DELL |
Quote |
Chart |
News |
PowerRating) and IBM
(
IBM |
Quote |
Chart |
News |
PowerRating) began to break down and ended up with “outside” days on
their daily charts, a negative sign. Many investors have been piling into the
so-called “sturdy” stocks as a way to dodge the overall decline in the
market. History does show that this is common behavior at this juncture of a
bear market. For their sake, one can only hope they are right. I have my doubts,
the charts below tell a very different story.
As of 5:30 a.m. PST, the S&Ps are trading just below the 824 level, a
level which will be key for today as well as an obstacle to make higher ground.
The 10:00 a.m. EST release of the ISM report will be pivotal and will likely
dictate direction early on. The consensus is for a reading 51. As always, a
number that comes in significantly away from consensus will offer some great
volatility spikes, so be ready on the keyboard.
In terms of some technical levels on the S&Ps, keep an eye on 808, 800
and 792. Upside resistance is seen at 827 and 834. Trading in the underlying
stocks continues to be an exercise in patience. Cherry picking the trades is how
I am getting through this ironically challenging environment. Typically during
periods of large price ranges, the trading is relatively smooth and predictable.
Currently we have a situation where the indices make large intraday swings, but
the price action which accompanies it is erratic at best. The sweet spot for
trading remains the opening hour, after that, the probabilities drop off the
scale. So, until things change, I am trading really lightly.
Key Technical
Numbers (futures):
S&Ps |
| *858* |
| 851 |
| 842 |
| *832* |
| 827 |
| 820 |
| 815-817 |
| 804 |
| 778 |
* indicates a level with more significance.
As always, feel free to send me your comments and
questions. See you in TradersWire.