Markets can’t find direction

Markets continue to look for a catalyst and seem content for now to drift. More economic data on tap tomorrow with the ISM services data, trade deficit and ADP employment. So far is has not been a huge vote for success relative to the economy. I am not optimistic taking into account what we have heard thus far. Earnings reports continue to be mixed and not exactly helping set the tone for the outlook in terms of growth. Apple stock has been a good example of the pressure being levied on stocks looking forward. The stock has closed below the 200 DMA for the first time since 2013. The stock is now down more than 13% from the high on July 20th. If this trend continues in the stock it could be a catalyst for the downside in the broader index.

Each day I start with a list of things to watch for the day. The reason is simple, good habit produce positive results. The key is to know what you believe… develop a list to watch relative to how your beliefs unfold. The process will give you confidence in the movesĀ going forward. The following are some items on my list for today:

  1. Ā NASDAQ 1oo index (QQQ) 50 DMA is in play… break is negative and exit point for the index short term. Shows big tech companies are struggling. SWKS, LRCX, AAPl and NXPI led the downside today.
  2. Europe (IEV) flirting with the 200 DMA and short term downtrend. Clear $45.50 on upside positive, break below $43.75 negative. No change today.
  3. Commodities selling again as growth, consumption and global economies hurting the outlook. GLD, SLV, DBA, DBB, GDX, SIL, CORN, USO, UGA, UNG and others are all heading lower.
  4. Energy (XLE) broke $68.60 low on Monday… Follow through confirms the downside trades in ERY on short side play as stocks fall lower.
  5. Semiconductors (SOXX) $86.25 break is bad news and could accelerate the selling on the downside for the sector. The ETF closed on the support mark… watching again tomorrow. SOXS short leveraged trade on the downside.
  6. Apple (AAPL) Closed below the $119.60 mark on Monday and the 200 DMA. Both are a negative for the stock and the sector. Fell 3.2% again today and confirmed the downside move. Not good news for the markets.

Some new developments to watch today were in theĀ ten-year bond gainingĀ six basis points back that it lost yesterday, and the party begins with interest rates as well as stocks not having direction. The rally in bonds seemed to come to an end today as they were just getting started on the upside move. They broke through resistance on Friday and cleared the 200 DMA yesterday (IEF). Back to earth as investors continue to eye the Fed and the looming rate hikes they continue to promise. As stated the last few weeks, I don’t buy the rate decline and still believe bonds face downside pressure as this unfolds, watching TBT.

Crude oil gained 55 cents to stop the downside move on Tuesday. The outcome for crude has plenty of work ahead as the uncertainty relative to supply and demand will not be resolved anytime soon. The downside remains in place and the stocks (XLE) in the sector have challenged the next support level at $67.50 level. Not even close to liking these stocks near term. Patience as they continue to fall. Our trade in ERY has played out well of late.

This remains a market in a trading range currently, but the parts are starting to deteriorate and we have to be cautious about the downside risk. I am focused on what happens as stated above day by day. And we will remain patient and let it all unfold, but one thing is certain… do not fight the trend.