Today is the next leg in the chapter for the current trend lower in the broad markets. Breaking down the S&P 500 index we find more sectors breaking lower. That is a negative short term sign for the markets, but the you still have to watch the trend and the possibility of a bounce from the oversold technical data for the index. The S&P 500 index closed at 1322 well below the 1340 support the world was watching. This puts the 1300 level in play along with the sentiment turning more negative. It is at points like this where all the data aligns that I am the most cautious. We have to use our stops and manage the possibliity of a reversal from the current selling. Be patient, be focused and manage your risk is the best advice I can give you currently.
Financials are feeling the heat from the issues facing Europe. The credit risk is alive and well. The impact on XLF, SPDR Financials ETF is a break of support at $14.38 and the downside play is firmly in play the last two week. The JP Morgan issue is one that has only added to the downside pressure in the sector and the short play with SKF, ProShares UltraShort Financials has turned out to be a solid trade short term. The banking exposure to Europe remains the primary concern and we are watching this to build if Europe/Greece remain in the news. Manage your short plays if you have them in this sector and let it play out one day at a time.
Energy continues to sell off on the heels of oil dropping below support and now at $92.290. The sector overall has continued to drop below support and is now attempting to hold near teh $64.80 mark short term. There is not sign of stopping at this point with the weakness in commodities due to the strength of the US dollar. DUG, ProShares UltraShort Energy ETF has done well on this trek lower over the last three months. Let the play run on the downside as long as the weakness remains short term. Adjust your stops accordingly.
Basic materials is another sector break support short term. The weakness in the commodities along with the pressure in the global economies has contributed to the downside and there is not much room for a reversal at this point. Any bounce is nothing more than a bounce at this point without some shift in sentiment and data towards the global picture. Not interested in the sector from the long side and the short has accelerated lower. Not willing to chase a downside play, but it is in motion without any near term sign of that slowing.
Technology broke support this week as well showing renewed weakness in the semiconductors on Wednesday leading to the break lower. There is no sign of relief currently for the sector starting with the semi’s breaking 383 support on the SOX index. The short side of the sector has played out nicely short term. I would protect the event on a bounce in the sector short term. The balance of the sector is equally weak when you look at the charts of IGN, iShares Networking and IGV, iShares Software ETF both breaking lower and adding to the weakness of the technology sector overall. Use caution in managing any short plays and equally look for any potential bounce plays if the sector shifts momentum.
Still looking for a bounce even if for a day on the broad markets. The sentiment is weak and the outlook remains questionable for the near term, but you cannot assume anything as this all plays out. Focus and discipline are what we all need to keep at the forefront of our actions daily as this market searches for answers