Friday put an exclamation point on direction for the short term. The NASDAQ 100 index fell 2.5% and accelerated the micro downtrend off the September 18th high. Support is near the 3850 mark and we will see how that plays out near term. Selling volume accelerated to end the week putting the sellers firmly in control going into this week of trading. The VIX index is the leaders on the scans as it has moved through the 21 level with the fear factor rising. This equals the level reached in January. This is the highest level reached since the 2011 uncertainty before the quantitative easing program from the Fed. This leaves us with the question, if the Fed completes QE the end of the month, do we return to the 45 level on VIX relative to the same global fears that were in existence then? Something to ponder as we start the new week of trading.
Running the EGG Scans
A continuation in the accelerated selling on the major indexes as investors run for cover. What to watch this week based on the scans:
Volatility Index (VXX) jumped to 21 and a new high on the current trend lower in stocks. As stateed in Thursday’s update, the close above 17.5 would be key relative to the sellers owning control and 21.5 would be the next level of resistance. That is where we went on Friday. 25 would be the next target from here is the anxiety to push the downside for stocks continues.
Small caps (TZA) dumped back to the previous lows on the Russell 2000 index. Looking at the weekly chart the $19 level is next resistance for TZA. If we find momentum through this level… it would be worth trading.
Gold Miners (DUST) gold bounced of the lows on Thursday, held Friday, but the miners gave back more than half of the gain from Wednesday. Nice reversal again. Tough to trade the movement in the sector, but it is there for the bold traders.
Energy (ERY) expanded the downside again as crude oil touches near the $85 level. The stronger dollar is exerting weakness into the sector overall and the downside remains in play for now.
Russia (RUSS) selling has returned to Russia and the upside on the short ETF.
Semiconductors (SOXS) The downside has been building gradually and the acceleration on earnings warnings on Friday put a big dent in the sector. Nearly a 7% decline in the index would beg for a bounce, but I am not willing to catch that knife.
The momentum is on the downside. The acceleration in the NASDAQ on Friday would lead you to believe a bounce is in order. However, that is a guess and not enough information in the charts or otherwise to warrant the risk of that trade. The downside is extended and risk is high for that side. We will watch today and see how this unfolds short term.