The Fish Out of Water Market

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Just when it looked like the bulls had stemmed the tide and the wild price swings were starting to abate, we wake up to a vicious gap down this morning. Despite the progress made by buyers in recent weeks, this is still the proverbial fish out of water market, flopping around and trying to make sense of foreign surroundings and predicaments. Clearly the news flow out of Europe is relevant enough to spook the market with each negative headline that comes out.

The S&P 500 is back down to test its rising 20-day moving average, which has been suddenly acting as support in recent weeks. Moreover, despite the huge move lower today, we are still holding above the prior multi-month trading range of 1120-1220/30. My main focus right now is not panicking either way. I am going to watch this 1240 level closely on the S&P, and should that be breached then I would expect yet another test of the top end of that prior range. As the session rolls on, I am going to focus on the action in individual stocks, to get a feel if we are seeing some bonafide breakdowns and reversals lower after the recent buying spree. Otherwise, today’s sell-of may be more of an index event that is not, in fact, presaging lower price ahead.

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Former NFL head coach and broadcaster Sam Wyche once began his color commentary for a game by noting that hard work alone usually insufficient to compete at the highest level. Actually, what the affable yet rough-around-the-edges Wyche said was, “Jackasses work hard. The key is to work smart.” Indeed, in the stock market truer words have never been uttered, as Mr. Market could not care less how may hours you spend toiling over research reports and “Breakfast with Dave” or Apertivo with Nouriel commentaries.

Speaking of working intelligently, you probably were not aware that HSNI (Home Shopping Network) hit all-time highs on Tuesday since its IPO several years back. How did I know? Well, I did my homework via perusing my saved screens inside The PPT. Members of both The PPT and 12631 can click here to access my custom relative strength screen, in which HSN popped up with the highest daily hybrid PPT score percentage increase on Tuesday out of any stock with a very high PPT Relative Strength score.

The retail sector still intrigues me, given the favorable setup in the ETF chart of XRT. I have also included the annotated charts of JOSB MW STMP as other long retail ideas below.

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Direct Vimeo Link Click Here Part I. 

 

Direct Vimeo Link Click Here Part II. 

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The bulls continue to make progress in the afternoon part of recent trading sessions, which sure beats fading miserably after a strong morning, as we saw many times in the third quarter. It is also nice to see volatility continue to slowly abate. I am seeing more and more breakouts happening, which is a positive sign for longs. That said, I am staying methodical in adding long exposure here, focusing on the very best charts.

Hubris is something that traders constantly struggle with, in the sense that we look for trades where conviction is high, but have to be nimble in making adjustments should things start working against us. Running the 12631 Trading Service along with @RaginCajun, we put ourselves out there all day, every day, completely exposing our portfolios, ideas, and trades for members to see, in addition to the work we put in here on iBankCoin.

With hundreds of loyal members sticking with us through all types of markets, behind a double paywall in The PPT, there is little doubt that we offer a first class service and community, complete with a state of the art chat room. What makes us special is not cherry picking winning trades or sweeping losing ones under the rug, like many traders do, but rather pulling for each other in a genuine, non-passive aggressive way. At the end of the day, that is why 12631 is not only still around, but stronger than ever and growing as we speak.

I will be back with more thoughts about the market in my recap after the bell. To learn more about 12631, click on that hyperlink or feel free to ask me questions in the comments section of this post.

 

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I flagged BSFT for you a few weeks back, but had trouble swinging it in front of the firm’s earnings. With that out of the way now, you can see what a tough throwback the chart endured. The stock broke out from well-defined resistance trend line, only to see an aggressive “throwback” to it. However, the post-earnings sell-off and volatility has subsided in favor of the bulls, despite the numerous bears betting against this stock having had every opportunity to break it lower. From an intermedaite-term perspective, price is acting well above all moving averages in a broader base.

Beyond that, you are talking about a low-float/heavily-shorted stock with plenty of aggravating factors for a big upside move. I am currently long BSFT inside the 12631 Trading Service and playing for a continued breakout, with a stop-loss below $35.50.

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We are basically reverting to the flatline today, as both bears and bulls continue to slug it out for control. As a result, many traders are getting chopped up with this intraday action, losing their lunch money or more. The old adage is to never short a boring market, but the lack of leadership on the long side is a bit problematic for me. It is nice to see the VIX dipping below 30, though the a close and follow-through to the downside would be favored by equity bulls.

It remains to be seen where the real leadership comes from, should the bulls prevail here. Many seem to be watching the likes of AAPL CMG DECK LULU ISRG PCLN V, as on the whole they appear to be basing out. I see plenty of charts that have potential to break out of bases, but we still need to see some strong hands come in and actually provide the jet fuel for those coveted breakouts.

 

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