Technical Picture - Broad Based Rally

Last night's post was entitled "Broad Based Selling" and today we had the complete opposite. S&P futures perked up in pre-market on news that the BOJ was cutting interest rates to zero and planning to stimulate through the purchase of gov't bonds. The speculation is that the U.S. will follow. Okay, we'll take it, but I'm not sure what it all means for future market strength. The dollar got crushed sending gold, oil, and commodities higher. By the end of the day all three major indices - SPX, Comp, and INDU had closed above last week's failed BO. My only regret is that the momo move occurred on my birthday which was a real distraction of constant interruptions.

HCPG picks GS, NUS and SU fueled the session's best trades. My mindset was so bearish after yesterday's session that I had not planned on the long side. BTW, good post about trading strategy on HCPG blog tonight.

GS formed a nice base within the OR. I took a partial at the daily spot and let the rest run. Price stalled at the 50% extension of the previous day's range.

NUS formed a mini C&H within the daily base allowing for a low risk entry.

SU was already in my swing account so I just added more on the BO. Resistance at top of triangle where I plan to lock some in.

AGU and MON shorts were aborted. AGU short at $76.00, locked in half a point, after which price reversed and carved out a handle, so I had to get out.

MON short worked for about 30 cents and then also carved out a base. So I was stopped out.

Technical Picture - Broad Based Selling

After the initial choppiness, bears took control and broad based selling ensued. As we can see from the SPY chart above, the bulls were able to defend last week's lows as support. However, the bears were effective in keeping the price action contained for most of the afternoon.

As discussed in last night's post, the $USD was testing support vs. Euro testing resistance. Today, the $USD bounced, weighing on commodities and gold miners. Crop futures were weak in pre-market putting further pressure on Agribusiness names. Early strength in financials finally gave way. Little was in the green except Casino, and REIT IYR.

Watching to see if today's lows will hold. If not, expecting a complete fill of the Tepper gap will attract buyers.

AGU - short the break of Friday's lows. Partial at gap fill and cover balance at support. Corn futures bounced today. I didn't take the counter-trend trade. Instead, I'm waiting for an ambush setup in the 50-62% fib. retracement zone of the last leg down at point 5 on the chart above.

TSL - Short break of ORL on the baseline - solar sector weakness in early trade.

The AAPL trade setup as planned, but didn't extend as planned. Price stalled on the minor support line and wasn't able to follow through in the afternoon. Notice how price reverses each time it hits the downsloping 50 SMA (green line). I expect more of the same tomorrow.

GS formed a bullish morning star reversal pattern at the full retracement of Friday's range. Entered long above 5 day MA (orange line) which is flat. Took a partial after a half point because the markets were so weak.

MON - still flagging. I want to short MON below $47.50 for a target trade to $45.00 support (July lows). On a related note, MOS missed earnings by $0.05 and trading lower in AH.

Technical Picture - Sector Rotation

A handful leading tech names (AMZN, NFLX, PCLN, BIDU) slid on higher volume and closed near the lows of the day. Apparently, institutions are dumping some of the end of quarter window dressing names and rotating to other sectors. More likely, they are lightening up, hoping to average in at better prices.

One name that looks vulnerable to more selling is AAPL. It held support on Friday's inside day, but the 15 min. timeframe is basing and ready to break. If it can't hold the round number $280, it will likely swoon in the area of the daily 20 SMA.

Oil has benefited from sector rotation and is now approaching resistance as depicted on the chart below.

Gold has extended 50% since breaking out of its base. Gold acts as a hedge against the falling $USD which is currently testing a support zone. The USD may pause here, but I don't foresee a huge bounce based on the oscillators.

Gold, on the other hand is a concern because most large cap gold names are not keeping pace with GLD. The GDX broke out and stalled. What's up with that? Is this an interim top?

$Euro testing resistance.

The strongest sector from the July lows has been Agribusiness. As you can see from the chart below, the steep trendline has been broken after price tested yearly highs. Crop futures such as corn are correcting in a big way, so we expect further pullback for Ags.


DE and AGCO are pulling back to trendlines.

POT is pulling back towards Gap support.

MON is bear flagging and looks like it wants to retest the July lows.

Financials are still lagging, but the broker dealer chart below is setting up nicely. I like how the MACD is on the neutral line, coiling before a potentially big move.

Technical Picture - Failed Breakout

The market made a solid attempt to breakout in early trade, but failed. Let's review.

All of the economic data was favorable. As depicted below, the Emini futures spiked on the GDP and Jobless claims giving us two waves going into the open. At 9:45 positive Chicago PMI spiked prices for a third wave, breaching the breakout point. By that time, the move was exhausted and it failed to hold.

Failures usually move in the opposite direction, so we saw a lot of selling when price took out support.

Last night we said that we'd like to see the SPY completely fill the Tepper Gap to confirm with the QQQQ. I'm still fixated on that idea. The backing and filling will be healthy and maybe we can make a clean break on the next attempted breakout. Keep a close watch on tomorrow's economic data, most of which, will be released during regular trading hours - 9:55-10:00 EST.

P.S. Emini futures slowly ticking higher in AH - China PMI 53.8 beat estimate 52.5

Technical Picture - Minor Losses

Before we get to the U.S. markets, it's worth noting that Canada's TSX closed at recovery highs today, taking out the previous highs set in April. The TSX is heavily weighted in commodities and the three day run in oil pushed us over the top.

The major U.S. markets are still range bound despite some constructive sector rotation. One of the problems as I see it, is the Tepper gap from last Friday.

As you can see from the 15 minutes charts of the QQQQ and SPY above and below, when prices tried to break above Friday's highs, they were firmly rejected. The markets sold off Monday afternoon with follow through into Tuesday morning. The Qs filled the entire Tepper gap in early trade, but the SPY/DIA only did a half gap fill. The last day and half have been spent chopping around intraday support. One way to get resolution is for the SPY and DIA to go back in fill those gaps more completely. Other than that, we would need some really favorable economic data to propel us out of this range.

I always monitor the SPY, DIA, and QQQQ intraday for tells. Today, the Qs were lagging most the session. So when the SPY and DIA tried to break session highs, they were rejected. After three attempts, we printed a lower high and down we went into the close as depicted below.

Gapper trade - CRUS - Price consolidates the bullish gap by flagging in the upper range. Place fibs. from low to high of opening range to set targets. On a measured move basis, price should run to 100%. CRUS stalled just shy of the target.

TSL was a HCPG pick. Price hit the number in the OR, printed an inside bar and broke out. I missed the break, so I scaled in on the retest and added when price took out the previous high.

SNDK was carving out a bearish flag, but today it broke to the upside (short squeeze). I only caught a half point scalp, but the chart looks good for a retest of the base at $40.00.

Technical Picture - Minor Gains

Opening spike down in bellwether AAPL set the tone for early trade. As we said last night, the weak close, left the door open for further downticks.

As you can see from the chart above, we shorted the break of closing lows and covered half at gap support. Price continued lower, almost reaching the second target which was a half gap fill.

Despite, notching minor new highs intraday, the markets could do further backing and filling. Watch the trendline off of today's lows to see if it holds as support.

Some large cap tech stock charts are still very unclear. AAPL's intraday 15 min. chart (below), for example, looks like the flash crash, so we need to take a cautious approach until all the backing and filling is done. Because if AAPL decides to go lower, it can affect the entire market.

We also need to see some more sector rotation. Now that semis are finally catching up, we need financials to kick in.

Interesting Pattern

S&P mini futures - Looks like an inverse H&S pattern taking shape within a downsloping broadening channel.