Gary Dean, on the Short Side Being Safest (MarketsPath.com)
The S&P 500 finished business and tagged my first level downside target for this leg down (actual low 886). I chickened out of taking a long side trade, even though I was seeing buy signals on our 15 minute charts. Obviously, the trade would have worked out fine, but with the internals bleeding and the Nasdaq -- PowerShares QQQ Trust (QQQQ) -- not participating, I thought the long side was too risky.
We may still have some room to move higher, but the safer trade at this point would be shorting at our upside pivot points. I have put the possible roadmap as well as resistance pivot points in the video update.
The high-end downside target remains in the 860-848 area. But odds are starting to increase for even lower levels than those, with an 812-780 target zone. But we will trade the markets on a day-to-day basis.
The head & shoulders pattern is still very much in play, but with every newsletter pointing it out, I am not expecting it to be as cut and dry as many are hoping for with that pattern. If it is going to play out, I would expect some type of gap down that blasts right through the 875 neckline. The walk down to the neckline line today seemed a little too advertised to play out today. The break of 888 was a small bear trap and now we retrace some before we start back down again.
For Tuesday: The futures down a bit, but pretty much flat for the most part. We look like we are starting to work off the positive divergences on the 15 minute charts, so any pullback should get bid back up. We look like we are going to open right at the 896 support pivot. If that is taken out, then we 894 gap support as the next stop. There is also a gap at the 892ish area that could also be in play.
Traders can look to buy weakness at the 895-892 pivots zones and use 886 as your stop if those levels are taken out. If they hold and we rally, look to sell longs and start layering short positions at the 903-909-912 pivots. We should see lower levels once this bounce ends. The safer trade is the short side for now.
Bottom line: The SPX hit the support area and bounced as expected. Now we wait for our resistance pivots to come into play to get short again. Be patient!
Harry Boxer, on Stocks to Watch that are Acting Well in this Pullback (TheTechTrader.com)
Monday was a weird day in the market - sharp early decline and then steady move back up that didn't have a lot of punch but late in the day exhibited strength, particularly on short-covering. Certainly a lot of stocks acting well in this pullback.
One is 3Par (PAR) , which was up 16 cents in a generally lousy market. Moving narrowly sideways in the last few days, in a flag type pattern above the moving averages and breakout point. So a possibility we can get an extension of this if the market cooperates and get up towards the 14 level pretty quickly. Certainly nice underlying technicals such as On-Balance Volume and Money Stream. Balance of Power pulled back to neutral during the consolidation, but that's fine.
Other stocks we like that are featured in our video report tonight are SIGA Technologies (SIGA), Geron (GERN), Kongzhong Corp. (KONG), Merge (MRGE), STEC Inc. (STEC) and SonicWall (SNWL).
Mike Paulenoff, on Bulls in Directional Control (MPTrader.com)
The recovery rally off of Monday morning's low at 882 in the S&P 500 e-mini futures contract hit my optimal target of 898.00 in pre-market trading this morning. Let's also notice that the pattern carved out since last Thursday afternoon resembles a small inverted head and shoulders base.
As long as 889 contains any forthcoming weakness, the integrity of the small base will remain viable. As sustained hurdle of 898.50 will trigger the upside potential off of the base, which projects to 906-908, and possibly to 915-18 thereafter prior to completion.
Conversely, a sustained decline beneath 889 will compromise the pattern and argue for a revisit of yesterday's low at 882 - and possibly an additional press into the larger, critical support zone between 880 and 870.
For the time being, the near-term pattern argues that the bulls are in directional control.
Jack Steiman, on Negative Divergences Particularly Poor Picture for Materials (SwingTradeOnline.com)
The S&P 500 lost its 50-day exponential moving average as has the Dow and most other indexes. Leaders are dying out one by one. The Nasdaq, the real leader, is about to lose its 50 and 200 day exponential moving averages. What does this mean for the market? That old neckline at 875 SPX is critical support. The measurement, if broken, is 81 points head to neckline or 796 SPX. No guarantee we go that low as unexpected news can change the market landscape in a heartbeat. However, you have to respect the possibilities should we lose 875 SPX.
I will never short an oversold market, which we have on the short term time frame charts only. The daily's are not oversold at all. Close but not there. A bounce off the 875 level that back tests the lost 50 day exponential moving average would be the place to short. A failure at those 50's with unwound short term oscillators is the perfect recipe for shorts, not before. We have likely made the turn from bull to bear here folks. However, we aren't far enough away on the SPX nor have we back tested it once lost to confirm it. That could be just a few days away. We must, however, respect the damage we received today that warns us not to be bullish whatsoever for now.
Wherever you turn tonight we see leaders that have lost their leadership. Stock after stock and sector after sector. The big tech leaders such as Aapl, Rimm, Pcln, Amzn, Isrg, Goog and Bidu got crushed. The banks rolled over in a big way today. The Uyg annihilated. The transports and retail sectors knocked out cold. With all that said, nothing got pulverized worse than the commodity stocks. When leadership is gone, you need to lower your expectations of what's ahead of us short term.
