Start the day with positive economic data. New home sales were much better than expected. That pushed the homebuilders (ITB) up more than 2%, but surrendered most of the gain in the afternoon sell-a-thon. Still like the sector looking forward and would the give back as an opportunity to track the position for a reasonable entry point.
The consumer sentiment was better than expected as well pushing the retail (XRT) stocks higher by 1%, but the failed to remain positive and closed lower by 0.6% on the day. Again, worth watching tomorrow to see how they play out.
Cause of the afternoon unrest? Selling… some wanted to blame Syria bombing areas in Iraq and other wanted to blame the worries about the global economy. Whatever reason we assign it was based on an event not a catalyst. Events tend to be temporary in impact and we have to watch to see how it all unfolds. Pay attention to the futures and overnight sentiment as we prepare for the trading day on Wednesday.
We remain in the business of managing portfolio and position risk while taking what the markets give.
Notes to Note:
- Energy fell 2%… that is the first significant decline in the sector since the current trend started May 15th. Watching to see if this is the extent of it or is there more on the horizon.
- Interest rates on the thirty-year bond fell on the worries above to 3.4% and TLT rallied.
- Oil prices closed flat at the $106 level and holding. Struggling to break higher and content to hold at these levels for now. Iraq situation has not had much influence the last few days. It has influenced stocks on Tuesday, but now we see how this unfolds.
- MLPs bounced back from the drift lower and continued to add to the upside today on money flow from the sellers. Still exerting leadership short term and heading higher for now.
- China dropped another 1.7% on the news today from the global economic picture. FXP gaining interest on the bottom reversal.
- KBE (banks) continue to consolidate near the current high with another inside trading day. Break on the upside was what I wanted and got it early for the continuation of the uptrend. That quickly reversed and we fell to negative territory on the day.
The chart below is Energy (XLE). As we stated above it posted the first really negative in a string of positives for the last six weeks. This is just a news reaction or something bigger. We have to watch how this unfolds. Support is at $95.08 and that is a far way from the highs on Monday. Watch manage the risk and then look for the opportunity that results from the outcome.
Still plenty of work to do and downside risk to manage. We were letting the upside run and expecting sum of the parts to lead the whole. Tuesday put a new twist on the tale and we have to see how this unfolds going forward. We will remain patient and let this unfold as we take it one day at a time.