So now what after the big drop yesterday. Doc Brett did his usual statistical thing to show what typically happens after a high momentum decline. His conclusion is that “we tend to see follow through to the downside over the short term.” I certainly won’t argue with that. Given how high margin debt levels had gotten I’m sure there are a lot of folks getting margin calls today. But here’s what’s on my mind…
Given that the indices are so far beneath their lower Bollinger Bands you’d have to be pretty bearish, or forced, to sell right here. I think we can expect the indices to meet those lower bands over the coming days. That may set up some better entries for shorting, if that’s your thing. If I was looking for a buyable bounce, I’d want to see some reversal candlesticks — ideally some hammers. So that means that we’d need to sell off hard intraday and then rally back to close near the highs. That’s the kind of action that flushes out the sellers. Until I see something like that I’m really not interested in being long. Here’s the S&P chart showing where it is in relation to the Bollinger Bands:
As for intraday action. Even with today’s gap up my intraday moving averages on a 30-minute chart are still showing a strong downtrend. We could easily retrace up to either average but until those averages cross, I’m biased toward shorts.
Bottom line is until I see a flush-out type of move I’d rather be on the hunt for shorts.
Don’t forget that Bernanke is speaking at 10:00…
On Today’s Calendar:
- 9:45 — Chicago PMI
- 10:00 — New Home Sales
- 10:30 — Crude Inventories
More Calendars: U.S. Earnings | Conf. Calls | Surprises | IPO | Economic
Potential swing trades:
See one of the recent ‘Chart Reading‘ posts for some potential swing candidates.
Potential day trades:
(From Briefing.com)
Gapping Down
Gapping down on weak earnings/guidance: BITS -27.0%, SLXP -17.2%, JOYG -6.9%, NUVO -4.4%, VPHM -4.1%, ADSK -3.1%… Other news: FMT -16.3% (subprime lender postpones release of 2006 results and delay 10-K, with no explanation), AVNR -10.3% (FDA requests co suplement NDA for Zenvia with additional clinical data).
Gapping Up
Gapping up on strong earnings/guidance: ADBL +12.6% (also upgraded at Jefferies & Merriman), VSNT +8.9%, DSCO +8.2%, DECK +5.0%, CHINA +4.2% (also China stocks rebounding pre-mkt)… M&A: NXL +13.5% (to be acquired by Centro Properties Group), EAGL +6.2% (to be taken private at $36/share)… China stocks bounce: ACH +6.2%, TSL +5.1%, CAF +4.7%, LFC +4.6%, CHL +4.5%, SOLF +4.3%… Other news: IGLD +4.5% (up following yesterday’s news that co will sell shares in two units), XOMA +4.0% (co and Takeda expand collaboration).
Disclaimer & How I use this list
