This week was pivotal. Although I don't think it's going to be straight down from here, in my opinion, this week's action has brought an end to the bear market rally that spanned from mid-March until mid-May. Our national nightmare is over.
All the indexes got beaten up, but their patterns and projections all vary. Investment banks had a tough week, and this chart of the $XBD suggests the high made on May 2 was simply another "lower high" in a long progression downward.
The NASDAQ bounced off major resistance at about 2,550 and also has cut through its 25% median line. At this point, as I mentioned in my prior post, I closed out my NDX and SPX puts for good profits. I have one index position – on the Russell 2000 – which I entered late today. But everything else is just shorts and equity puts.
This channel indicates the reason I was eager to take profits on the $NDX. Of course, I keep thinking about the MLK 3-day weekend in January and what that was like. (If you don't remember, worldwide markets got creamed and not only did I have no index puts, I had an index call!) In any case, I'm taking a breather on index puts, with the exception of my $RUT position.
I'm still holding on to my $XAU puts, since I think gold has topped out and is heading lower (sort of like oil………..)
The Russell 2000 index did a couple of important "bearish" things this week. First, the breakout from the $730 level has failed, thus negating its bullish important; second, it has dipped below both its major (blue) and minor (green) Fibonacci retracement levels.
And – – I've just got to say it – – 1383 on the S&P is broken! I have been yacking about that level for ages. It finally broke today. More importantly, the close was near the day's lows. We didn't rally. We are plainly below 1383 now.
Just for the hell of it, there are a handful of stocks that I'd be tempted to buy calls on (but I won't). Should we get a bounce on Tuesday, there are some battered issues which looked poised for a small pop. There's Alcoa……
…….Capital One, which is very near its supporting trendline……..
…..and Genco, which has retraced back to its neckline…….
As for shorts, here are a few favorites: Autozone still appears to be in the throes of a diamond pattern.
Albermarle is right up against its broken trendline.
Cerner is falling away from its major resistance at $48.75.
Chattem completed a very nice head and shoulders pattern today.
And Schlumberger is also falling away from major resistance.
So – – a great week! And quite a contrast to the last few. To close today, here's an interesting new video from Don Harrold (I own puts on ISRG, so I found this especially intriguing; plus I have this quirky fondness for the truth, so Cramer gets on my nerves too).
