Techs Lead For A Change
We've lamented the lack of direction Nasdaq markets have exhibited lately, but they were the leading force today. Down. The Dow did its best to stage several rally attempts but techs began their decline and never looked up from there, which dragged the old economy along for the slide.
Expiration week and the FOMC event next Tuesday mean absolutely zero to traders right now. Bears have overwhelmed bulls at this time and look to hold the upper paw going forward. Signs of a struggling rally have been run over by southbound traffic for days now. Every rally is being successfully sold as investors and traders head for the exits. And a longer-term view suggests this overall move has just begun.
(Weekly/Daily Charts: Dow)
The Dow has continued to coil itself into this wedge and will soon explode one way or the other. Stochastic values indicate it will be down. Don't be surprised if the Dow is trading below 10,000 at this time next week once the interest-rate decision has been made.
(Weekly/Daily Charts: QQQ)
The NDX is rolling over again and looks for support near 38.00 once more. This index has traded relatively narrow but decidedly down for weeks now and will probably continue to merely bleed away.
(Weekly/Daily Charts: OEX)
Coiling up like the Dow, we can guess the 590 area is next support the way stochastic values look from here. It should find help near 600 but a move below there will quickly reach 590, quite possibly within hours of the break.
(Weekly/Daily Charts: SPX)
So goes the big S&P. All wedged up and somewhere to go... our guess via stochastic values is down. Look for 1160 to be visited soon.
Dead Bulls? Looks that way for now. We are subject to the errant short- squeeze rally to wipe out stops at any time right now, but long term charts are telling us everything we need to know. Selling is the direction de jeur for now if indeed we have direction ahead.
Markets continue to be very choppy, it goes without saying. Each session tests or takes out the previous high or open from the day before and likewise the lows. Both ends of each range are hit or breached and tested several times a day. When looking at daily charts it's easy to see where markets ended up, but dialing into short-term charts show a gut-wrenching ride to get there.
The best approach for position traders in buy & hold fashion would be to use 100% risk capital to buy September put contracts with and ignore intrasession noise. If downside follow through is ahead of us, it might stagger and step its way there.
Swing traders are greatly challenged by the intraday volatility. It is extremely hard to take a play and hold stops through all the turbulence. Waiting for ideal entries, taking the clear ones and holding wider stops may be necessary. Day traders can play some intraday moves but the ranges have been tight all month.
Summation We have two more weeks before post-Labor Day action returns. Last year we saw an August rally sell off hard in September. Will an august selloff this year precede a September rally? Hard to say right now, but the downside demands our attention in this Sea Of Uncertainty called summertime action.
Best Trading Wishes,