1:05pm (EST)
The bulls are trying to recover from last week’s losses but have struggled gaining ground as we head into the second half of trading.
The bears are working on a couple of important streaks and although the session is mixed and volume is low, they could be a clue or two of what lies ahead. If the market does end lower today
The Dow is currently in the red and a lower close would make it 3-straight negative Monday’s. More importantly, if the blue-chips finish with another loss, it will be the Dow’s 4th-straight – something that hasn’t occurred all year.
We spent a dozen+ hours doing chart work this weekend and all of the technical signs are pointing to further weakness and much of the direction could come from the Fed minutes on Wednesday.
The zombies are in Jackson Hole this week, without Ben Bernanke, to talk about the Fed’s monetary policies. There could be some news from the event that could fuel further selling pressure, or perhaps, some good news that could help the bulls rebound.
Due to the uncertainty of the Fed’s minutes, and the possibility of market moving news midweek, we wouldn’t be surprised to see a tight trading range for the next few days. However, if the next wave of support cracks, nothing will be able to save the bulls until the 100-day MA’s (moving averages) come into play.
We have been trading light this month as we wrapped up most of our June and July trades last week. We have been prepared for the pullback to the bottom of the trading ranges and it remains to be seen if another 3%-5% of downside action is in store or if current levels hold.
The indexes are just 3% away from their all-time highs so while the talking heads continue to call for a correction or a continued selloff, keep in mind the indexes are still in a trading range from earlier this summer.
We have also said this is a stock picker’s market and that homework will become that much more important. We did a ton over the weekend and there is a trade we like that we are ready to take action on.
This will only be a 1-2 day trade as we plan to be in-and-out by Tuesday or Wednesday. The put options we are recommending are on a stock north of $63 and are going for 60 cents.
We expect shares to be southbound on Tuesday and Wednesday and under $60 after the company reports earnings.
As we head to press, the Dow is down 4 points to 15,077 while the S&P 500 is lower by 2 points to 1,654. The Nasdaq is up 14 points to 3,617.
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