Sellers Step Back in on Worry

And the hits just keep coming. As I stated in my notes this morning, I was looking for two days with the same sentiment… oops didn’t happen again. NASDAQ drops 1.1% on the day helped by the reaction to Facebook’s latest acquisition, and the stock dropped 6.7% today. Our puts we added several weeks ago did very well on the day and we hit our stop on the stock last week locking in our profit on the long term trade of better than 100%. For those of you who have followed along on that journey for the last 10 months it has played out very well and we will see how the puts work out from here. Bottom line… the market is still confused on direction and susceptible to every wind of news.

The triangle pattern we discussed last night on the S&P 500 index moved to the bottom of the pattern and is holding near the 30 DMA on the close. How this plays out tomorrow will determine if we stay in the pattern or break lower. 1840-1850 is the support level we are looking to hold and we closed at 1854. Our short positions recovered and advanced today, and we are going to hang with them for now with our stops in place. Know your strategy and manage your risk going forward. 

Moves worthy of NOTES:

Semiconductors (SOXX) down 1.1% on the day and showed a crack on the downside for the first time since January. The balance of tech continued to struggle as well with the internet (FDN) sector down 2.5% today and 10% for the last two weeks plus. Software (IGV) fell 1.7% as well and continues to add downside pressure on the broad sector of technology. Networking was off 1.8% adding to the downside, but holding support at the $34.50 level. Throw in biotech off nearly 2% today and this could get messy if tech breaks support and accelerates lower.

NASDAQ 100 index fell to the next level of support at the 3580 mark. The downside leader is the large cap stocks and biotech. AMZN, PCLN, ALXN, CTXS, etc. have all broken key support levels and the downside is in play. QQQ broke support at $89 setting up QID trade last Friday. Watch for the next entry point at $87.30.

Russell 2000 index broke lower today as well through the 1170 mark and closing at 1155. Broke the 50 DMA and is testing the longer term uptrend line. This is another short setup if we break the next level of support and continue to accelerate.

Still watching the global markets as they are holding up better than the US this week. Europe (IEV) bounced 1.3% Tuesday and was off just 0.2% today. Be patient here and understand the volatility that comes with the global markets currently as this all plays out. The EFAE index (EFA) enjoyed a bounce of 1% as well on Tuesday and flat today. Emerging markets (EEM) cleared resistance again at the $39.50 level and continued higher today on a breakout, but retraced to near flat on the day. There is plenty of challenges facing the sector, but the move is worth our attention and potentially a trade. China (FXI) despite the negative data continues to move higher off the recent lower and is back at the 50 DMA. Testing the move and downtrend line currently.

I discussed in the weekly update on Saturday that the lack of clarity remained an issue, needless to say the day to day activity has validated that issue. We would be better off taking a break than fighting the current market movement. However, the intrigue now is the short opportunity setting up on the indexes. The uncertainty has led to some selling, but the selling is still bringing in buyers, but that is what we will watch tomorrow. The buyers are still not strong enough to keep the uptrend in play and the topping pattern we discussed two weeks ago is still in play. When that merry-go-round stops the market and investors will then decide what valuation works best for the markets looking forward. Practice patience for now and go have some fun versus beating your head against the market.