Economic Reports Due out (Times are EST): NFIB Small Business Optimism Index (7:30am), ICSC-Goldman Store Sales (7:45am), Import and Export Prices (8:30am), Redbook (8:55am), Treasury Budget (2pm)

Pre-market Update (Updated 8:30am eastern):

  • US futures are slightly higher. 
  • European markets are trading 0.4% higher. 
  • Asian markets traded on average 0.7% higher. 

Technical Outlook (SPX):

  • Major sell-off reversal yesterday and finished significantly lower on the day with a huge SPY bearish engulfing pattern. 
  • Market is coming off of short-term overbought conditions, but just slightly with yesterday’s sell-off. 
  • Broke back below the 20-day moving average but found support at the 10-day MA. 
  • Bullish wedge breakout still intact
  • S&P needs to get back above 1334, to change the mood of the market. Much more bullish above that price level. 
  • Volume remains relatively average. 
  • The markets in general have pulled back roughly 10% off of its recent highs which is typically considered a “pullback” in the markets. 
  • The possibility also exists that we are putting in a very short-term inverse head and shoulders pattern on the S&P, in which we would unlikely push past 1334 before pulling back moderately to form the right shoulder. 
  • Major bottoms or at the least, interim bottoms, tend to make huge gains in the initial days following the bottom. See last October and September 2010. 
  • Minor support at 1249, 1209 would also represent a level of price support, should we close below 1266 support. . 
  • 30-minute chart has an inverse head and shoulders pattern with a small right shoulder.
  • VIX is still elevated and rests above 23 – below 20 and the bear’s hopes for a break higher is greatly hampered. .

My Opinions & Trades:

  • Bearish wedge on SPY makes me cautious about buying new long positions today. Focus should be more on the short side and a willingness to cover if we break back above yesterday’s highs. 
  • Shorted NUE yesterday at $36.67
  • Shorted GWW yesterday at $183.41
  • Current Long PPL at $27.65, Short ELN at $13.19, Short HT at $5.30

 

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