Markets On the Edge?

Choppy day for the markets overall as investors can’t decide on direction. The news continues to weigh on the markets as analyst want to talk about bubble stocks, overvaluations and a not so great economic picture. The noise is loud and clear as the chatter grows from a mumble. The S&P 500 index dropped 0.5% or 9 points to close at 1867  and 1850 remember is the lever we struggled to move through just a week ago. If we fail to hold the break higher, I would take that as a negative sign for the broad markets. The short side is getting interesting as SDS sets up to break above near term resistance at $28.75.

The VIX index is coming back to life with a bounce to 14.8 and the top end of the range. If we get above this level and close it would confirm that the nerves are kicking in for investors and money is starting to rotate towards safety. VXX, iPath S&P 500 VIX Short-Term Future ETN is in position to break from the current trading range as well on the upside. Worth our attention both from the view of investor sentiment and a trade opportunity if the sellers attempt to take control of direction.

Yields have moved back to the upside of late and BND, Vanguard Total Bond Market ETF is sitting on the 50 DMA as support short term. A break lower would be a indicator the current rally in bonds may be over. The Fed is continuing to cut stimulus and putting pressure on rates near term. The downside is setting up again for Treasury bonds as well. TLT and IEF both are at support of the 50 DMA as well. Watch and see how it plays out. The spoiler would be a correction or pullback in stocks as money would shift back to safety mindset.

Energy struggled again today as XLE, SPDR Energy ETF once again stalled at resistance near $88.50. The move lower of 1.1% was a negative for the sector as the price of crude retreats back below the $100 mark and now trades back near the 200 DMA. A break of support would be negative for the price of crude and could very well set up a short opportunity in the commodity. Oil services (OIH) fell 1.3% and Exploration and Production (XOP) fell 2.1% showing the negative impact on the sector as crude declined on the day. Watch for short trade opportunities if this continues to unfold on the downside.

Russia remains in the headlines and the trade in RUSS (Russia Bear ETF) has continued to move higher. This is a good example of how to trade the news short term. If you are in the fund don’t overstay your welcome and watch to see how it unfolds moving forward.

Emerging markets continue to struggle on the news from China. EEM was in position to break higher last week and now it is in position to break lower. EDZ is the 3 times leverage short ETF for the emerging markets.

Manage your risk as back and forth bantering is directionless for stocks. Plenty of issues on the table and any one could be a catalyst as we remain in a news driven market currently.