Summary: Market is sitting on support levels in the macro view with many stocks sitting on or failing below support. Libya and Japan continue to the fuel the bears as bulls trade nervously. In other words, it will be harder to go up than down in this environment.
With even America’s pride and joy consumer company, AAPL, showing signs of weakness, it’s hard to go long heavy here. AAPL needs to hold current levels or it could fall fairly significantly and scare all of the technology long traders out of their positions.
I also have an eye on BBY and durable goods orders this week.
Favored Sectors on Friday: There aren’t many. Most traders are removing risk.
Top Friday Sectors:
- Tobacco – careful – FDA put a smack down news report out.
- Rare Earths
- Communication Services
- Gold and Silver
The Trade: I’ve shortened the time frame on my trades and not exposing more than 10% of my portfolio to swings. I’m also very heavy cash. Throughout the day, I reduce long exposure risk by jumping in and out of SPY Puts. Play defense, not offense.
Currently sitting heavy on SMA100 and 23.6% retracement. Friday’s tall upper shadow is not impressive implying traders were exiting on volume. Looks like SPX is trying to build out a bear flag, so we’ll need to watch SMA100 very carefully. A fall below could shake out the nervous longs and send the market quickly to the next strong support level at 1226. Neutral to Bearish.
The weekly shows the obvious resistance level. Watching the ascending the triangle. Japan pulling down oil while Libya and global turmoil pushing it up.. net – prices holding steady for now.
Looks a lot like the SPX, but the new downward channel is more obvious. JJC is stuck between SMA100 and SMA50 and we’ll need to see a break above trendline resistance for copper to start looking a little stronger. Copper can be used as a temperature of the overall growth in global markets. So, if copper starts moving up while the SPX falls/holds steady, consider that a bullish divergence.
Watching the EEM will give you some view into the risk trade and related confidence in ecomonic growth. Investors are less likely (generally) to dump money into EEM if there are fears of gloabal strength. A fall below horizontal support at SMA200 is very bearish – especially for small-caps (also considered riskier). So, keep and eye on EEM to help measure your risk in small sized equities.
GLD is still in an uptrend and it’s probably time to start getting your gold and silver watch list together. If GLD pushes through 140, there will be news coverage and buyers will likely jump in. Watch GLD closely this week. Silver has an even cleaner and strong run up – same story… Watch, for breakout in silver names as well based on the ETF setups.