Pre-market update (updated 8:00am eastern):

  • European markets are trading mixed/flat. 
  • Asian markets traded 1.7% higher.
  • US futures are slightly higher ahead of the bell. 

Economic reports due out (all times are eastern): Housing Starts (8:30am), Jobless Claims (8:30am), Philadelphia Fed Survey (10am), E-Commerce Retail Sales (10am), EIA Natural Gas Report (10:30am)

Technical Outlook (SPX):

  • The SPX managed to creep higher, just barely, but remain within a 5-day consolidated range. 
  • Volume dropped back down to Tuesday’s extremely low levels. 
  • We’ve managed to come off of overbought levels in the short-term. But remain extremely overbought longer-term. 
  • Last 5 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.
  • With these low volume levels, continue to expect choppiness in the market. 
  • 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. 
  • 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 1359.
  • 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 on Tuesday (+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 AIG yesterday at $34.05 from $32.46 for a 4.9% gain. 
  • Bought ARUN at $16.79 yesterday.
  • Moved my stop-loss in MDT up to $39.61. 
  • Keeping a perfectly hedged portfolio, until we get a better feel for market direction going forward. 
  • 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 MDT at 38.15 and AMZN at $233.90. Short BRO at $25.65, HE at $28.45, COG at $42.01


SP Market Analysis 8-16-12