Bulls Stumbling On Holiday Eggnog?
My best final-session guess for today was a choppy open where positions would get squared away, and then gentle drift into the close. True to market form, it did exactly the opposite from which I dared guess.
Intraday charts flashed bearish all day and warned of lower prices ahead, but it was quite a surprising plunge in the final 30 minutes. Heck, that was more action squeezed in there than most complete sessions have provided lately!
Day traders long puts or short e-mini futures had a lovely afternoon indeed. Markets are truly things of beauty whenever they move, up or down. My definition of an "ugly" market is one that churns sideways and that includes those creeping rally yawners.
Must our fate to suffer continued sideways churn from here? Possibly, but a few long-term chart signs point to potential profits in the offing.
(Weekly/Daily Charts: SPX)
Reflection of the Dow, OEX and SPX (pictured) all look the same. Bull flag formations in the weekly chart fail to break out and confirm. That in turn must prepare us for another trip back down to support within the consolidation at its lower line.
All oscillators are weak to outright bearish and suggest lower price levels ahead. Looks like we can short current levels with a fair (not great) level of confidence. After Monday's slide we have intraday chart signals buried in oversold extreme but no signs of a bullish bounce from there. The best downside entries would come if they manage to struggle back towards overbought extreme and fail once again, but it's very possible intraday indicators will remain pinned in oversold while markets work off excessive long term downward pressure instead.
We'll look to short the iShares in Sector Share model and play put options in Position Trade model accordingly.
(Weekly/Daily Charts: QQQ)
The QQQ (pictured), SOX, BTK and IAH among other tech sectors all look very similar. Perfect wedges offering support and totally bearish stochastic values give us an excellent point of reference to short...
(Weekly/Daily chart: IAH)
... as do the IAH Internet Infrastructure HOLDRs as well. Mirror charts with good risk/reward setup parameters. Full details are found in Sector Share and Position Trade models.
(Weekly/Daily Charts: XLI)
The S&P 500 Industrial SPDRs give us a good picture to play as well. With stochastic values near overbought or turning bearish from within, we can lean to the downside on this one as well. Note that this week's candle (weekly chart) is inside last week but of course is only Monday's action. Regardless, a break below last week's low would culminate from failure at the 200-DMA (right chart) and send stochastic values soundly down from overbought extreme.
If it chops sideways to higher: we leave it alone. A further break lower must be respected and played accordingly to all the signs that align in front of us.
(Weekly/Daily Charts: RTH)
Retail sector has enjoyed stellar upside performance since late September lows. Will their holiday season earnings report be naughty or nice? Can't say for sure, but this one is tottering at the top of a tall tree indeed.
An attempt to get short right now has breathing room to fall down near the 93 area and then 90 from there. With both weekly and daily chart stochastic values overbought, it's not a matter of if prices come down from here, but only a matter of when.
(Weekly/Daily Charts: PPH)
The Drug Index has been quietly coiling up for almost two years now. Support has been in place since March 2000 while resistance built from February 2001. Weekly chart signals are mixed to benign and price action hangs right in the middle of the consolidation pattern.
However, price action has closed below its 200 DMA on Monday with stochastic values in the midst of a bearish reversal decline as well. It seems safe to test the downside with easily defined points of risk to defend. Short plays here should enjoy a bit of space before threatened from here, which is our main criteria for buy & hold plays!
None are a certainty, but seldom is that luxury afforded when trading financial markets. Always keep proper entry point techniques and judicious account balance management rules at the forefront of each trading decision. Which way the market goes only matters when we are long for the ride in harmony with its desire!
Watch For Coiled Markets,