Interest rates are making traders a little nervous compounded with a long equities win streak and a rising dollar. This environment convinced traders to, once again, take profits after lunch despite the tax news out today. The trend this week makes me wonder if we’re stuck in a range or if this is just the reallocation of funds before the next leg up or down (market is leaning down). Maybe we’ll just glide calmly into the holidays and all the fun will pick up again in ’11. Not easy to predict. However, the post lunch downward pressure is something we haven’t seen a lot of lately and concerns me as a primarily long trader.
In yesterday’s blog, I pointed out price and its relationship to SMA10 on the SPX daily chart. I don’t like large gaps between the two. I suggested that we needed to close the gap before we can move back up. Today did just that – we closed the gap. This is good news for bulls and bears. The bulls needed to close the gap to allow consolidation before next move up and the bears are looking for SMA10 to fail as support. The bears are also encouraged by the falling MACD histogram and the strong volume on a red candle print. The bulls like that SMA20 turned up today after running flat for a while. We could probably argue back and forth as to where we’ll go through the holidays, but let’s keep it simple. Tomorrow, 1230 is on the radar for the longs and the shorts.
Tomorrow, along with every other trader, I’ll be watching 1230 on the SPX. I will also have my eye on the dollar, silver and coal.
The dollar index is at resistance levels and it will be interesting to see if it legs up or reverses back down. I pullback could help equity markets heading into the weekend.
I’m also to see where silver goes tomorrow. I’m currently long silver via January calls and am hoping we get a trendline support bounce here:
Another group I’ll be watching is coal. I love coal pullbacks – the world is driven largely by coal and I don’t see that changing anytime soon. Here are a few coal stocks I’ll have an eye on for possible swings or intraday scalps..
PCX – the segment leader – PCX tends to run up SMA20 and support has been quite strong at these levels int he past. Tomorrow I’m hoping it gets above SMA20 to get me interested in a long position. If it stays below, we’ll need to focus on $16 for possible support. I’m not interested unless it gets back above SMA20 and I’ll probably play this with January $17 Calls depending on volume and price.
ACI – has a nice triangle forming on SMA10, but that’s a heavy red candle today. I might look for a better pullback to horizontal and SMA20 support… 30.80 range.
MEE – Careful. Looks like it might want to fail SMA20 – possible coal short if you’re looking for one. $48 next support.
BTU – Good looking chart and setup nicely for swing long with stop at or just under SMA20.
WLT – definitely one of the strongest in this space. The overall coal pullback has hardly touched WLT as it glides high above SMA10. I’ll look for others only because I’m looking for the volatility and support. If we get a pullback in WLT, I’ll definitely toss it on my Options watch list.
ANR – SMA20 pullback. Same story as others. possible long swing with stop just under. Selloff has been on low volume.
LLEN – another SMA20 play
JRCC – Forming triangle on SMA10. Looks heavy and likely to fall below. I’m more interested in the SMA20 support group.
That’s all for now. See you tomorrow and careful overexposing yourself long if the SPX drops below 1230…. it could get ugly in the near term.