Markets Remain Mixed With NASDAQ Lower

The markets remain confused about the future and the volatility remains in a narrow range looking for direction. Reading the headlines tonight is like a mystery novel everyone has an answer, but no one really knows who did it. Leading the negative activity on the day was Banks and Technology. The banks continue to react to the after-hours news with Citigroup being denied on their new capital plan and the sector fell 1.5% on the day. Technology as a whole has had a tough week with internet and networking stocks struggling. Today semiconductors sold again off 0.7%. Some sectors caught some support, but the downside is still in play short term. The upside leadership was in treasury bonds, energy, utilities, telecom and REITs. In other words, the defensive stocks were leading.

The triangle pattern we discussed last night on the S&P 500 index broke on the downside to create a short opportunity as a trade. 1840 is the level to break as support. We borke the 30 DMA on the close with the 50 DMA close at hand. How this plays out tomorrow will either confirm the short or find support near term. Our short positions held their own today, and we are going to hang with them for now with our stops in place. Know your strategy and manage your risk going forward.

Moves worthy of NOTES:

Citigroup is denied revisions to it’s capital plan by the Fed and the stock fell more than 5% on the day. The banks moved lower under the stress of the “big brother” watching syndrome. Still like the sector longer term. If interest rates are going higher we have to watch and see how that unfolds.

Facebook remains under pressure from the latest acquisition and tested support at the $58 level. However, it did manage an intraday reversal worthy of our attention tomorrow. If we get the follow through move watch for the opportunity to play the bounce higher.

Semiconductors (SOXX) down 1.1% on Wednesday and 0.7% on Thursday. $77.95 is support and we are sitting there currently. The second day of selling is worth our attention as the sector has been a clear leader and increased selling would be a negative for the sector overall. The balance of tech continued to struggle as well with the internet (FDN) sector down more than 10% for the last two weeks plus. Software (IGV) fell and continues to add downside pressure on the broad sector of technology. Networking was adding to the downside and broke below the 50 DMA. Throw in biotech and the outlook remains questionable overall.

NASDAQ 100 index broke the next level of support at the 3580 mark and is testing the 100 DMA. The downside leadership is spreading as reflected in the broader declines the last few days. QQQ broke support at $89 setting up QID trade last Friday. Watch for the next entry point at $59 which we hit today.

Russell 2000 index broke lower through the 1170 mark on Wednesday and today it tested 1148 support and held into the close. Broke the 50 DMA and is testing the longer term uptrend line. This is another short setup if we break the next level of support and continue to accelerate. TZA is the leveraged short play on the small cap index.

Still watching the global markets as they are holding up better than the US this week. Europe (IEV) bounced 1.3% Tuesday and has held steady the last two days. Be patient here and understand the volatility that comes with the global markets currently as this all plays out. The EFAE index (EFA) enjoyed a bounce of 1% as well on Tuesday and is holding above the 50 DMA for now. Emerging markets (EEM) cleared resistance again at the $39.50 level and continued higher today on a breakout allowing us to take a trade as an opportunity. There is plenty of challenges facing the sector, but the move is worth our attention and potentially a trade. China (FXI) despite the negative data continues to move higher and today challenged the 200 DMA before retreating on the close. Testing the move and downtrend line currently.

I am sticking with our discussion from Saturday that the lack of clarity remained an issue, needless to say the day to day activity has validated this. We would be better off taking a break than fighting the current market movement. The buyers and sellers continue to jockey for the upper hand, but the buyers are still not strong enough to keep the uptrend in play and the topping pattern we discussed two weeks ago is not able to garner enough negative to lead the markets lower. Tomorrow ends the trading week and with one day left in the quarter next week, I would not expect much to change from today’s market climate. Patience and if that doesn’t work… take a vacation.