Monday, October 3, 2011
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The lower range is resolving to the downside. Today the SPY closed at new yearly lows, and the selling has not abated after-hours either. The Dow was down 2.36%, the QQQ's were down 3.29%, and the S&P was down 2.85%. It was a very controlled down day in the market, not one that has you thinking "capitulation buy". The technincal damage has been adding up for weeks as series of lower highs has been in place in this lower wedge/bear flag pattern. There have been a few days to take notice with the final one being last Thursday (9/29) when the leading momentum stocks all reversed negative and got pressured, breaking upper support areas. Cash is king in these times.
Below is the weekly chart of SPY. The Bear Flag pattern is just starting to break. The targeted move for this pattern is down to the lows from last summer of $101, but may find short term bounce at the first support level of $107. It would be prudent to cover shorts into that area, if you shorted the break of the bear flag, so you can be prepared to buy back SPY at heavier support levels.
A lot of technical damage in this market and a lot of broken charts. Over the last few weeks we have been recommending caution, as any bullish action appeared to be nothing more than short covering based on European posturing, rather than action. While the market corrects, pressure is felt by most sectors and stocks. Cash is king in times like this. Taking trades is key in this environment as we see wild swings in both directions.
Tomorrow is expected to be the release of the iPhone 5, and the stock may react to the event. Definietly watch the price action, but don't blindly buy it based on the event. AAPL closed below the 50-day moving average on Friday with continuation to the downside today. $395 should have been your last upper level stop, if you did not lighten up when it failed to hold the new breakout above $404.50.
BIDU broke below its last key support level of the 200-day moving average and multi-year trendline before a lot of other high beta tech names reversed at highs. The chart in BIDU is broken and will take time to repair.
LULU closed below the 200-day moving average today. It has not traded below the 200-day moving average since September 2010. There is a composure change in this retail leader, and it will take time for this stock to repair. $56 was the upper level stop.
This leader lost support of the 50-day and 100-day moving average but it is above the 200-day moving average.
The accelerated uptrend line in MA has been highlighted for a while now as a sign to take caution in this stock. This stock may see a bounce off support of the 100-day moving average at $305 but big support in MA is $291/$288, a retest of the prior breakout.
The OIH broke its yearly low well before the S&P. The bounces continue to be sold in this ETF. The trend is down and momentum is to the downside.
The XLI, the industrial ETF, closed below its bear flag pattern as well today. This ETF broke down in early August before the S&P. This should continue lower.
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