9:00am (EST)
Whatever method you use to pick stocks (or options)…your ultimate success or failure will depend on your ability to ignore the worries of the world long enough to allow your investments to succeed. It isn’t the head but the stomach that determines the fate of the stock (or option) picker – Peter Lynch
We have mentioning a move lower or a possible trading range for the market and yesterday’s action was not what the bulls were hoping for. However, we used today’s quote to help put things in perspective as the bulls struggle to get back to last week’s highs while at the same time they are trying to hold down support. Of course, the “or options” parts were added to Lynch’s thoughts by us because we are option traders but the same principles apply today.
The market started off in positive territory on Tuesday but higher oil prices and continued unrest overseas were a drag as the bears’ evened things up for the week and then some. Oil went out at $100.17, up $3.20, into yesterday’s close and we mentioned last week and again in our Weekly Wrap Sunday night that the market will follow oil in reverse. Oil closed at its highest levels since 2008.
The Dow was hit for a triple-digit loss as it fell 168 points, or 1.4%, to settle at 12,058. The blue-chips traded to a high of 12,261 and the low was 12,055. We were looking for 12,100 to hold in our 1pm update yesterday but the selling pressure was just too much. However, key support at 12,000 held but there could now be pressure down to 11,800 for the index.
The S&P 500 lost 21 points, or 1.6%, and closed at 1,306. The index managed to touch a high of 1,332 but we knew once the 1,325 level was taken out intraday the index was headed lower. Support held at 1,300 as the S&P traded to a low of 1,306 but the bears are targeting 1,275.
The Nasdaq got crushed for a 45 point loss, or 1.6%, and finished at 2,737. We were hoping 2,750 would hold but we also felt our lower-end target would come into play once broken. For Tech it is 2,700 and although this level held yesterday, the bears are gunning for 2,650-2,600.
Trading ranges and corrections are hard to predict in bull markets but you can prepare for them by reading charts and using “targets”. Although the bears have momentum right now, we doubt the bulls will go away quietly. However, if the bears can crack a few more layers of support, the bulls may start to panic and the battle could get ugly.
Futures have been whacky all morning, trading mostly lower throughout the night before turning positive ahead of the ADP jobs number which was incredibly good. The ADP Employment Change report said 217,000 jobs were added to private payrolls for February which was well ahead of the 163,000 that had been forecast. This bodes well for Friday’s nonfarm payroll report and the unemployment rate.
Dow futures are down 7 points to 12,015 while the S&P 500 futures are lower by a point to 1,300. The Nasdaq 100 futures are off by 2 points to 2,309. Oil is up $1+ to $101-and change. Subscribers, check the Members Area for the latest trade updates.
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