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We’ve got ourselves a big cliffhanger headed into next week, as the weekly chart of the market illustrates below. You can try to game it all you want, but the bottom line is that this price action is characterized by elevated volatility and extreme randomness. Throw in a huge political X factor over this weekend with the European Union, and cash-ish is the best thing to smoke.
Stay thirsty, my friends, but most importantly stay liquid.
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You can see that the 30-minute chart of the SPY below is menacing enough to keep most of my cash sidelined. The most frustrating thing about trading and writing about the stock market multiple times per day, every day, is that you can put in long hours preparing yourself for a market that cooperates and permits individual stocks to break higher. In this type of market, though, the price action is simply too random to really act on the homework. Eventually, that will change for the better.
Despite today’s selling, we are nearly 60 S&P 500 handles above the August lows of 1101. Thus, you can see that even the shorts are not having an easy time here. If you are a swing trader like me, the best thing to do is still wait out the randomness of the price action. Clearly, the market hates uncertainty and will react in this manner–with two to three days up big, followed by two or three days down big.
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I wrote this post several weeks back discussing the notion that McDonald’s was likely too stretched on the monthly chart to continue higher, as buyers exhausted themselves. Keep in mind that the stock has acted as a proverbial safe haven over he past several quarters, so you have to consider whether the trade became too crowded to persist in the intermediate-term.
Today, McD’s is seeing a negative reaction to sales data they released this morning. I do not think Ronald McDonald has put in a “generational top,” but I am expecting a whole heckuva lot of sideways-to-down action in the coming months.
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Those “random” solar stocks have now gone essentially roundtrip to their March of 2009 lows. When you look at charts of solars like FSLR TSL and LDK, it is little wonder why the solar ETF, TAN, is plunging as though chocolate wafers were more valuable than solar wafers.
Having said that, with solars coming within pennies of those major 2009 bear market lows, the presumption is that they will find support here. Moreover, the daily chart of FSLR, perhaps the solar with the best name recognition, has a notable bullish RSI divergence.
Solars have tortured buy and holders to no end. In fact, they have destroyed so much of their capital we never hear from the solar bulls anymore. Just as the case was with my GNK and RIMM calls last month, the solars might be so bad that they, too, are good here. Click here to see that post.
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