Pre-market update (updated 9:00am eastern):

  • European markets are trading 0.4% lower. 
  • Asian markets traded 0.6% lower.
  • US futures are slightly lower ahead of the bell. 

Economic reports due out (all times are eastern): MBA Purchase Applications (7am), Consumer Price Index (8:30am), Empire State Manufacturing Survey (8:30am), Treasury International Capital (9am), Industrial Production (9:15am), Housing Market Index (10am), EIA Petroleum Status Report (10:30am)

Technical Outlook (SPX):

  • Despite trading higher for most of the day, the SPX succumbed to a late day sell-off that finished the market slightly in the red. 
  • Volume picked up some, but extremely low still. 
  • Last 3 days in the market has shown sideways consolidation and a bit of distribution, leading me to believe we’ll probably push lower in the coming days. 
  • Should a pullback occur, watch the 10-day moving average – its been a popular destination for bulls to reload at. 
  • Since the pullbacks off the 6/4 bottom, the pullbacks have ranged around 30-60 points each time, which would give us a range of 1380-50.
  • Choppy action on the 30-minute chart over the past 7 trading sessions. 
  • Volume has become nearly obsolete and in line with holiday like volume. In fact volume has decreased 8 out of the last 10 sessions. 
  • Such low volume levels leads me to believe that we may be weakening under the surface and that the slightest bit of bad news accompanied with volume will trigger a stop-order raid on the bulls. 
  • The choppiness that has been a part of the trading action is due in large part to the low volume levels as well. 
  • Short-term we’ve actually slightly dipped below overbought levels. 
  • Next level for bulls to overtake is the 1422 recovery highs on the SPX. 
  • It’s not uncommon to see large market rallies going into an incumbent re-election.
  • If you look at the 4 previous higher-highs in the market since the 6/4 bottom, then one could conclude that we’ve reached another temporary top, and are prime for another pullback. 
  • One area of concern is the 3 large gaps off of the 6/4 lows that remain unfilled, including 6/6, 7/26, 8/3
  • At this point, uptrend support rests at 1358.
  • SPX trading above all significant moving averages (10,20,50,200).
  • VIX has moved below 15 for the first time since March but spiked noticeably higher yesterday (+8%)
  • If another sell-off were to ensue, watch for a break and close below 1354 for a new lower-low in the market.  

My Opinions & Trades:

  • Day-Traded UEC yesterday and sold at 2.38 from 2.31 for a 3% gain. 
  • Sold OSK at $24.05 from $23.74 for a 0.31/share gain or +1.3%. 
  • Moved my stop-loss in MDT up to $39.61. 
  • Going to consider any sell-off as opportunities to buy stocks on the cheap. Dip buying should be the norm until a lower-low is put in place.
  • Remain long AIG at $32.46, MDT at 38.15 and AMZN at $233.90. Short BRO at $25.65, HE at $28.45, COG at $42.01
  • 3 longs and 3 shorts in my holdings is just a way for me to weather a pullback that I think should come here fairly soon. 


SP Market Analysis 8-15-12