News Column

Today's Trading Plan: A Sign of the Futures

August 8, 2014

Ryan Mallory

Pre-market update:

Asian markets traded 1.9% lower.European markets are trading flat.

US futures are trading 0.3% higher ahead of the market open. 

Economic reports due out (all times are eastern):
Productivity and Costs (8:30), Wholesale Trade (10)

Technical Outlook (SPX):

Heavy overnight futures sell-off has recovered and now trading in the green after Russia is apparently trying to ease the tensions between them and UkraineA heavy overnight sell-off that recovers to go green prior to the open is often a strong sign that a bottom is in place. If you are shorting stocks at this juncture, covering them would be an ideal approach to managing the bounce risk. The market is so stretched to the downside, that any market bounce will likely be very significant - to the tune of 20-30 points on the SPX.Volume continues to be highly elevated on down days. Bullish divergence possibly on the T2108 (% of stocks trading below their 40-day moving average) as it managed to finish higher as the market finished notably lower. The trend-line off of the November 2012 lows is being tested at the current price level and holding. This is a long-term trend line that should offer the market a respectable amount of support. The support level as noted in the chart below held up perfectly as well yesterday. VIX only rose by 1.7% yesterday to 16.70. Momentum on the 30 minute chart is clearly waning. Some solid support off of the trend-line formed from the March through May highs. The sell-off didn't just begin last Thursday with the hard sell-off, according to indicators like the T2108 (% of stocks trading above their 40-day moving average), stocks have been selling off since the beginning of July, while the overall market was simply consolidating. As a result, there is a good chance with all the extreme readings that market indicators are providing that we are near a market bottom and ready to bounce higher. I would not be getting short on this market, as the key/opportune time to have done so would have been in early July. At this point, one is simply chasing after the recent sell-off. The market doesn't care about the economy nor earnings. That is not what is driving it. The market only cares about what the Fed is doing to keep equities propped up. 

My Trades:

Did not add any new positions yesterday.Did not close out any positions yesterday.  Will consider adding additional positions if the dip buyers come back into the market today. Remain long EBAY at 51.75, GPK at 12.00, AAPL at 95.56, FB at 72.53, WDC at 102.17, NFLX 430.35.60% Long / 40% CashJoin me each day for all my real-time trades and alerts in the SharePlanner Splash Zone

Chart for SPX:

SP 500 Market Analysis 8-8-14

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Source: Shareplanner

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