A Week Too Early
Timing market action is never easy... especially judging when to be away from live fire. Months ago I had to choose a one-week period to tie up many loose ends and decided that the week before Labor Day had best chance of being flat. So travel & business arrangements were made and finalized.
Wouldn't you know I had to suffer through those same droll weeks of inaction you did, only to find the one week I was trapped away from so active. Thursday was my busiest day of all and of course, that's when the most action took place. I was talking to people about closing costs on houses and timber sales of red oak and cherry trees when all I could think about is how far the S&Ps had traveled.
It is a double-barrel guarantee I'd have jumped on SPX puts when the Thursday morning upsurge failed and it would have been a nice time of it indeed. But as Buzz is wont to say, the "Great Humiliator" strikes again. Guess I forgot what it's like to be a part-time trader after so many years of time freedom and my hat is certainly off to all who juggle trading effort and jobs or careers
So I'm back in the saddle today and what do we find? One hairpin turn on call plays this morning and a subsequent put play on the way back down I elected to abstain from. That's it; a paltry day trade to finish the week. Now the long weekend is upon us and I begin my journey cross-country to Colorado tomorrow. What may the markets offer next week when I'm manning the battle station with you again?
(Weekly/Daily Chart: SPX)
Weekly charts show the SPX managed to close on lower support of its descending channel. We see stochastic values nearing oversold extreme, but not quite there yet.
Daily charts show the same thing. Bearish stochastic declines may be nearing a temporary end and Fibonacci retracement values point out all the overhead resistance from here. Not likely to be as straight-up a move as it was going down, should strength find its way into the markets.
(Weekly/Daily Chart: Dow)
The Dow is now weakest of all major indexes. That weekly chart bearish triangle broke down in a big way and portends a near term target to the 9,750 area. Other measures suggest it may go far lower than that, but first things first. The lower triangle line near 10,200 area is certain to be resistance now, after we see 10,100 area penetrated first.
Weekly stochastic values are still bearish but turn much slower than daily values of course. Other factors we'll discuss in a bit may have us eyeing the upside next week as well.
(Weekly/Daily Chart: QQQ)
The Q's remain trapped in their channel and are trying to find a temporary bottom here. Overhead congestion is very evident here as well.
(Weekly/Daily Chart: OEX)
The OEX looks like the SPX (naturally) and could be ready to mount the next upward assault as well. If so, we know where to enter & exit new plays based on daily-chart evidence from there.
Put/call ratios have been high, the VIX made a sharp bullish spike and ol' Dick Arms TRIN index (he wants it to be called the Arms index, but habits die hard around here) posted two straight sessions of readings above 2.0 on the scale. I'm no expert on this study and heaven knows it is far from precise, but such extremes usually do a great (if not quite early) job of calling significant turns.
I would not be looking for the ultimate bottom in place or call Thursday a successful retest of spring lows but we can be very sure CNBC and their herd of bias bulls will below long & loud. Just like they have done the past umpteen times on each leg down since last year. I'll wait and see what October has to offer before announcing the bear is dead for good myself.
Chances are we'll see more of the same: sideways action in larger ranges that will continue to break bullish hearts and slosh traders around until who knows when. One thing we can expect are greater directional moves that will actually last a few sessions or even into the following week. Yes it's actually true!
Still, I cannot emphasize enough the warning of not to fall in love with market direction either way. Just about the time we all decide it's going one way forever is right when the next reversal draws near. It's a trader's market until proven otherwise and that proof may not be close at hand.
A special thanks to Buzz Lynn for handling all the Market Wraps this week in lieu of my absence. I know it only takes a few minutes to read this stuff but it is very time and labor intensive on the production side, and nobody I've ever read does it better than Buzz! Glad have such a talented teammate, that's for sure.
Enjoy the long weekend and get ready to kick off the best six months of trading action, beginning next week.
Best Trading Wishes,