After completing a 1/3 correction from recent highs markets are trying to find a bottom. Upon completing the first phase of the correction; the support levels for the S&P are at 1373 followed by 1363. NDX – is closer to 200 day mva, with an oversold momentum and recent lows of 1710. That places us back to Q3 lows.
Sentiment: Also, put/call ratio retraced from highs of 1.70 – suggesting that overly bearish/fear indicators have corrected. In other words, this should build optimism for trading longs in the near-term. Although, a dramatic downside move can shrug many shorts, there is additional downside left in the marketplace.
Therefore, the bulls are warming up to “buy the dips”. Sector selection for a recovery bounce is key. In select areas some sectors are due for further correction. In my opinion, as previously stated Financials and Energy need further down/sideway trading action. Near-term indicators are pointing to oversold levels, and that presents a buying window.
Rate-Sensitive themes: Financial weakness continues on the surface and REITS are vulnerable since from a long-term perspective, stocks appear extended.
Drivers of similar themes are caused by various headlines. Continue adding to shorts in select names: FED, BKUNA and ICE. Despite, oversold levels, I am looking for one more downside opportunity.
Crude: Friday’s close on Oil showed the strength of overhead around the $60 level. There is a downside pressure from a cycle perspective and further stabilization ahead. This reflects in the behavior of energy stocks, which should struggle to provide market leadership. Beyond OPEC’s news, chart suggests a trading range behavior with $55 next support.
Further signs of strength in technology. Stocks in CSCO’s group are attractive and worth a look for bargains. CSCO acquiring Webex sign of growth and works well for other competitors in related areas. Again focus in this sector is on stock picking, identifying timely entry points. Waiting for one more downside move in the broad market to accumulate.
Additional Wisom:
How are we able to make money by following trends year in and year out? I think it’s because markets react to news, but ultimately major change takes place over time. Trends develop because there’s an accumulating consensus on future prices...So price adjustments take time as they fluctuate and a new consensus is formed in the face of changing market conditions and new facts. For some changes this consensus is easy to reach, but there are other events that take time to formulate a market view. It’s those events that take time that form the basis of our profits.
John W. Henry
No comments:
Post a Comment