Two-Part Stock #Market Recap 11/17/11 {Video}

Direct Vimeo Link Click Here PART I.

 

 

Direct Vimeo Link Click Here PART II.

 

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Each time you think you have this market figured out it seems to throw another ZING! your way. With that in mind, let’s keep things simple. The SPY is obviously breaking down from that widely-watched symmetrical triangle, and is showing no signs of reversing up yet. The oil services and semiconductors that were very hot  yesterday and on the verge of bullish breakouts are suddenly breaking down from their own triangle (from failed moves come fast moves?). Finally, copper mining giant Freeport McMoRan is backtesting it neckline from the inverse head and shoulders bottom earlier this fall. The best hope for the bulls is that his throwback holds. Otherwise, the picture is increasingly growing in favor of the bears. Could it be a huge trap to set us up for a holiday rally? Sure, it always could. My point is that I will not be the first move acting on that theory–I will let the institutional money decide if that scenario will play out, and then follow along.

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A quick update here for those of you who have been interested in my short AAPL trade. The daily chart above tells me to stay short here, given the confirmed island top, breakdown from the initial consolidation, and then the further breakdown from a bear flag today. I could easily see a test $360 coming soon. I will let the price action guide me, with a buy-cover stop above $395, but for now this remains my type of setup and trade.

I am also staying short due to the weekly chart. Note the bearish MACD divergence on top of the bearish MACD cross. Historically, this is a big deal for the stock, and favors either a sideways or down period of price action over going higher. I have no desire to call a generational top to Apple. Nor do I wish to argue how many iPads they will sell for Christmas.

I am simply trading what I see.

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To follow-up on this post that I wrote yesterday and many others before that, it appears as though the divergence between the senior and junior gold miners has soundly been resolved in favor of the youngins. In other words, risk appetite never truly came back on via the high beta miners, with respect to willingness to put capital to work in the gold mining sector. Note the GDXJ breaking down from the bearish rising edge, and the GDX collapsing out of that flag.

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Talk about a tease and trap of a market…

http://www.youtube.com/watch?v=FKBv9pM_ycM&feature=related

 

 

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We have some modest downside follow-through to Wednesday’s late-day selling going on this morning, but it is nothing too scary yet. The bulls, once again, defended the 1220-1230 zone on the S&P 500, which represented the very top of the prior multi-month trading range. However, to beat the drums again, the more times you probe a key reference area, the more likely it is to eventually give way. So, at this point I would resist the urge to complacently buy the dip with no clear exit strategy in place.

We also have a marginal breakdown from the widely-monotired symmetrical triangle on the S&P and many other daily charts. This could easily be a trap to shake out weak longs and punish eager bears, and would be the bulls’ ideal weapon of choice to launch this market higher into the holiday season. Recall that from failed moves usually come aggressive moves in the other direction. We saw that yesterday, in many respects, with seemingly bullish consolidation after bullish consolidation lined up and raring to go higher, only to suddenly be hit with the late-day sell-off. Thus, there remains considerable risk to either side of the trade.

I have tightened up my portfolio considerably inside 12631, locking in some gains and taking a loss in my 1/2 position starter in SNDK this morning. The good thing about layering into positions instead of buying or shorting all at once is that you can get out rather easily and unscathed should the trade work against you. That is exactly what happened with SanDisk, and that is our style in 12631.

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