I present the intraday chart for the small cap ETF to illustrate the potential short-term bottoming formation we have seen shape up this morning.
If bulls can take price over $105.30 I think there is a decent chance for a relief rally early this week. Ultimately, though, I expect it to fail and give way to another leg lower.
For now, shorts should be careful pressing here, and longs should not plan on overstaying their welcome.
A move under $104.25-$104.50 would begin to negate the bull case here and likely lead to a washout lower.
Many market players seem to be inclined to look for a sharp, snapback rally in the tape.
But before that happens, we are seeing more stretching of marquee names to the downside. First and foremost, major casinos continue to stay quite weak, namely LVS MGM WYNN. Indeed, bottom-fishing these names has proved to be particularly ominous this autumn. Still, earnings are coming up, which is good enough reason to cover shorts and wait for a better short entry later this year, as I have seen no evidence of a major bottom in place.
In addition, marquee momentum leaders such as GOOG NFLX PCLN TSLA are also quite weak at the open, seeing me stay sidelined here, largely in cash.
On the Ebola front, of CMRX TKMR get going today I may take a stab on the long side.
All in all, this is a corrective market with risk remaining lower.
This is my quarterly post that I publish at the beginning of every earnings season. It is as much a reminder to myself as it is to you.
WIth a rebalanced Dow Jones Industrial Service Average, consider this a friendly reminder to check and then double-check your current portfolio holdings to see when they are scheduled to announce. As a relatively short term swing trader, I am almost always looking to significantly reduce or outright close a position into earnings. There are simply too many variables for me to have an edge.
Even if you have illegal inside information about what a particular firm’s earnings will precisely be (and would thus face the distinct possibility of winding up in a federal pound-me-in-the-ass prison, with no conjugal visits) there is still no way to know how the market will react. Stocks can just as easily sell-off on great earnings as they can on horrific ones, and vice-versa.
Technical analysis has its clear limitations in that it can only demonstrate what is currently known and knowable by the markets. To presume that charts can dictate everything into the future is pure folly. Trading IS gambling, as we are wagering on outcomes yet to be determined. Instead of running away from that fact, a better approach is to embrace sound risk management.
In sum, leave the heroic all-in bets on an earnings play to old men trying to recreate their youth as they imagine themselves as Steve McQueen in The Cincinnati Kid. For those of you who have seen that movie, they will likely face the same fate as McQueen’s character did in the end as well.
Chipotle and Gilead, seen below on their daily charts, are two examples of stocks which have been apparently holding up well relative to the rest of the market amid the selling of late.
Headed into this week, the issue is whether these two succumb to market selling pressures and break lower, effectively becoming attractive short setups, or instead lead the way higher into a board market bounce.
I would go with the flow on these two, looking at them as quick shorts into a market swoon and also looking to scalp them long into a rally. Either way, I think there is a nice trade for both this week.
