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MARKET WRAP UP 08/19/10
With the Philly Fed seeing its worst reading in over year, combined with weekly unemployment claims moving back up to 500,000, the market had every excuse it needed to sell-off this morning. And sell-off it did. Just as the New York lunch hour approached, the S&P 500 hit its lowest level of the day, at 1070. For the remainder of the session, the market attempted to put in some type of bottom, as the S&P finished down 1.69% to close at 1075. As we have seen for many months now, volume ticked up on the heavy selling, and breadth was unflattering. All in all, today marked a sound thrashing by the bears.
Nonetheless, from a technical perspective all that has really happened is that we have retraced the move we made from this past Monday. The S&P, along with many other key indices and sectors, did not break below those Monday lows. As you may recall, earlier this week I talked about the idea of how the bulls needed to present themselves to defend the key multi-month support levels. Well, we are right back to that scenario. The bulls absolutely must defend these current levels, in order to avoid a major breakdown.
You might notice on my updated and annotated daily chart of the S&P 500, seen below, that I tightened the channel lines for the multi-month broad channel. I think the new channel reflects just how tight of a range we truly have been navigating these past three months. Note that any attempted break from the channel, in either direction, has been aggressively faded.
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Updating the daily charts of some other key indices and sectors, the predominant theme is that, despite today’s vicious selling, we are either slightly above or directly pinned to Monday’s key multi-month support levels.
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With options expirations tomorrow, we can expect to see more whipsaws from this market. With that said, the multi-month support levels that I outlined above are of the utmost importance. A major breach of them tomorrow will likely beget even more selling. Similarly, if the bulls can hold these levels, yet again, then the stage will be set for a run to the very top of the trading range. While I know that sounds like “we can go up, or we can go down,” that is simply the nature of a multi-month, indecisive stock market that has been trading in a tight range.
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[youtube:http://www.youtube.com/watch?v=P4TbrgIdm0E 450 300]
hey chess
thanks for keeping us updated with all this sick info! hope all was well for u today 🙂
Thanks, Duane. Grateful for the kind words.
Chess – Nice job as always thanks. Yeah, 10% drawdowns suck, but if we crashed to new lows, I could still sell out and be up 25% for the year. Life sucks, right? =:0
Oh BTW, love the Miles and Coltrane. Perfect vacation music.
Well done, Yogs. You have been killing it inside The PPT this year.
agree – good taste in music -how refreshing, great charts as usual and a pleasant delivery of the goods sans attitude..much appreciated
Miles Davis at his finest..
Definitely.
Thanks Chess….not only do you rock, but you can kiss me deadly.
Thanks, Jack (I think).
“Similarly, if the bulls can hold these levels, yet again, then the stage will be set for a run to the very top of the trading range.”
Expect the bull side: in the game of trading government support is the rake.
Long term call:
Same old song till December.
Could be. Thanks for the feedback.
Thanks chess.
Question. do you see a head and shoulders forming on the hourly SPX (since July 8th) that is fractally consistent with the larger head and shoulders forming on the 1 year SPX? The reason its bothersome is that we only got the smaller head and shoulders today due to a fundamental shift in economic data (Philly Fed). Volume was up and not everybody had a chance to notice the pattern.
It could be. However, in my opinion for any of those patterns to be confirmed, we will need to see another break of 1040 and then 1010 to get remotely close to declaring the h&s successful.
Just my 2 cents, but I don’t think we will break this level yet. I am long (from 1071) September SPY & SSO calls vs. 1068. If we gap down, I will be looking for a reversal. I think the S&P has a date with 1080. If I am wrong and the market does head lower, I would expect to see the 1060 – 1063 area and if that’s the case, I won’t be stubborn.
Thanks for helping me navigate through this shit, Chess.
1080 – 1085 area MIGHT have me looking to hedge… we’ll see. GLTA.
Thanks for reading, fizzle.
C&W … Does the chart on GFI qualify as a “megaphone/Diamond top” ?
Recalled this term from an earlier post by you and it turned out to be very accurate. Not sure of the parameters as it did seem to break out of the pattern today but thought you could add some insight as to whether a top is in or not. My thinking is that it needs to breakout soon or else ….
TIA
Teahouse,
Thanks for reading.
GFI is a bullish chart to my eye, and I believe the Ragin Cajun likes it as well. I tend to be very selective in assigning “tops” to charts (unlike some of our competing websites). If it fails to breakout here, then perhaps the bullish thesis will fail. But I would not be shorting GFI here.
Thnx
A gentleman and a scholar