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Economic Reports Due out (Times are EST): Chicago Fed National Activity Index (8:30am)

Premarket Update (Updated 8am eastern):

  • US futures are moderately higher ahead of the open.
  • European markets are trading about +0.7% higher. 
  • Asian markets were mixed/flat.

Technical Outlook (S&P 500):

  • The breakdown in the market continued on Friday, finishing down yet again on strong volume. 
  • We closed right on the 1294-1296 support area that I had mentioned in previous posts as being a significant support area. It would make sense to me that we would see a bounce today off of this support level. 
  • Most significant breakdown was in the Russell Index which closed below the 200-day moving average. 
  • Volatility is rapidly increasing – above 25 and at the highest levels since December of last year. 
  • 11 out of the last 13 trading sessions on the S&P have finished lower, including five straight, and we are well oversold on both daily and weekly charts. 
  • Oversold bounce is nearly a given at these levels. In August – October’s Sell off last year, we never saw a sell off of more than seven straight days. We are currently on six straight days. 
  • A strong bounce could take us as high as 1357.
  • Next major support level, should we break below 1294 would be 1275. 
  • Volume continues to increase as the market pushes lower. 
  • Closing lows haven’t been seen since 1/17/12. 
  • 30-minute chart shows a perfect downtrend in place but extremely oversold. 
  • S&P is trading below the 10-day, 20-day and 50-day moving averages.

My Opinions & Trades:

  • Be careful with adding any new short setups to the portfolio, good chance you will be squeezed on them. 
  • Will likely look to add some fresh long positions (1-2) to the portfolio to try and catch a market bounce. 
  • I’m viewing this market with a sell the rip, cover the dip approach. 
  • Covered VAR on Friday at $61.15 from $63.56 for a 3.8% gain. 
  • Covered JCI on Friday at $29.48 from $30.73 for a 4.1% gain. 
  • Covered SIAL on Friday at $68.36 from $70.27 for a 2.7% gain. 
  • Covered ST on Friday at $30.44 from $30.37 for a -0.2% loss. 
  • Shorted ATVI at $12.06. 

Chart:

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