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Further to my post of June 29th, I thought I'd show where the Dow 30, S&P 500, Nasdaq 100, and Russell 2000 Indices are currently trading in their 2012 Q3 timeframe relative to the prior quarters. In that post, I mentioned that if the Q3 candle retested the Q1 lows again, I'd be very skeptical of much of a convincing advance above this year's high during these three months.
As can be seen on the updated Quarterly charts below, the current Q3 candle did, indeed pullback, but hasn't quite retreated to the Q2 lows, although the Nasdaq came close. Instead, an "inside" candle has formed, with price near the top on the Dow, S&P, and Nasdaq. The Russell is the laggard in roughly the middle.
As You know, recently the market has been acting a bit more sluggish, prone to more weakness, and my own personal indicators (which I do publish on the site) projecting a new wave of weakness too. I'm more concerned than I have been of late to make sure that I'm not over extended to the long side and that any position that I do take on, shows an ability to buck the market trend should it move lower.
Below is a list of stocks that I consider nice defensive plays, and while some of them have great growth stories to them, what I am looking for is opportunities that won't overexpose you to large losses should the market move lower.
Of my favorites is Amazon.com (AMZN) which continues to trend higher and now has a beautiful cup-and-handle pattern in place right near its highs.
So far, we've talked primarily about trending days and what kind of early morning action brings them about, and what can be expected throughout the rest of the day. But lets change things up a bit, and let's look at what happens when the market is direction-less and what we can expect before it happens.
FIrst-off, these types of trading days tends to wear traders out, because whether you are long or short, nothing seems to really stick, and often times traders will see profits come and go, with no chance at capturing them, and that leads to this kind of behavior:
The wave iv for USO bottomed right at the top of the wave i in this current 5 wave structure. Since that time, it completed a nice 5 wave move up, and, thus far, seems to be within a wave 2 of the next 5 wave rally. The last top we saw this past week at the 33.75 region looks most like a b-wave within that wave 2, which likely means that we will see one more pullback in a c-wave to the 33.25 region, or even a little deeper down to the 33.00 region.
I think that pullback would be a buying opportunity for a short- term trade which will take the USO back to the 35.76-36.00 region. You should either use a stop of 32.40 for this trade, or 32.60 if you would like a tighter stop. But, in truth, I really do not want to see the market below 32.90, since staying over that level gives us the confluence we are looking for to it the 35.75 level.
We saw some big moves last week on the basis of talk by Draghi, backed up by Merkel, that the ECB would take whatever action necessary to save the Euro. Talk is cheap though and Merkel hasn't yet confirmed that she will accept the ECB printing money to save sovereign EU nations in trouble. I suspect she won't, and unless she does this move doesn't look likely to last long. Be that as it may some interesting things happened from a technical perspective last week so we'll go through those.
On the SPX daily chart the SPX closed at the upper bollinger band on Friday. This is an obvious time to look for some retracement though I note the overnight action on ES looks like a bull flag so far. If a new uptrend has started then there should now be strong support in the middle bollinger band and 100 DMA area around 1360: