8/18 - Market Analysis

SPX...great technical move down today...highs at resistance and lows at support. Notice that we formed the first lower high in this current trend. This was the first sign of danger at the end of the spring rally...this looks to be following the same pattern...



QQQQ fell about the same as DJIA and SPX percentage wise which means that QQQQ is no longer an exception to the rule nor the leader of the pack...Resistance looks very strong


XLF was the scapegoat of the media today, following bullshit news on FNM and FRE...But whatever the reason, XLF does look like the best sector to short out there if we are to breakdown


USO was weak and to some ppl's surprise, the indexes are still down. Maybe traders are finally realizing that high oil prices are not the only reason for the weakness in the markets. Oil not seeming to move with the dollar as much in these past few days...My guess is that oil is at a sensible level now, which makes it less attactive to traders and less sensitive to the market and dollar action.


UUP...dollar weakening slightly today...didn't seem to bring much strength to oil though as it still ended down. Not much to say here except that the indexes seem to fall more in line with the dollar than oil nowadays...


Analysis: I loved today! wow!...despite being mostly sidelined from fatigue and a committment to be a spectator til we see a breakout or breakdown, it was a very fun day today. It was such a good day to be a technician. Always fun when things make sense. What i'm talking about is the pullback off resistance and the close near support with financials leading the market lower and tech and iwm showing no relative strength. What i expect from the market is a headfake down or a consolidation day tomorrow before we get a strong volume true breakdown of support. Technically, everything is just too perfect, with everyone having an eye on the support line. I don't think it will get broken as cleanly as most traders hope, especially as volume remains low and no big news is in sight...Oil inventory on wednesday is the next big catalyst i am foreseeing. We need a good catalyst as any breakdown on low volume will not be hugely significant.

Game Plan: If we get a consolidation or dead cat bounce tomorrow, i will be looking to enter a new short position, most likely related to financials but tech would not be out of question. If we fall hard tomorrow, i will not chase to enter positions.If the dollar again falls and oil breaks resistance, i will look into going long a very oversold commodity or energy play that seems to be finding support.

Buy List:

bond insurers (abk, mbi)
beaten up energy, commodities
agriculture
USO
ROST


Sell List:

stocks at strong resistance (aapl, msft, intc, goog)
financials (leh, mer, ibn, xlf)
casinos
exchanges
consumer (JCG, TIF, BIG)
CMG

Big Movers List (will make a big move but dunno in which way):

HES
OXY