9:00am (EST)
Yesterday’s opening bell was a bull stampede as China’s decision to let its currency float had Wall Street in a buying mode. It was a vote of confidence for the bulls, but the rally lost steam by midday as stocks finished in negative territory following the lack of details from China. This led to uncertainty, and the bears quickly saw this as they took advantage of the euphoria.
As a result, the Dow slipped 8 points, or 0.1%, from Friday’s close and settled at 10,442 but comfortably above support which is at the 10,400 level. However, we mentioned the bulls could “set their target on 10,600” in Sunday’s Weekly Wrap, and that acted as short-term resistance. The index traded to a high of 10,594 on Monday.
The S&P 500 dropped 4 points, or 0.4%, to close at 1,113 but held onto the 1,108 level which is where its 200-day moving average stands. The index traded to a high of 1,131 and a low of 1,108. Again, the index kissed the 200-day MA, folks. We said the next assault level would be 1,125 first, and maybe 1,150, but you can see how intense this battle is getting. The bears pushed the bulls to their limit, and a break below 1,108 could favor the bears.
Finally, the Nasdaq had its best gains right at the open which was a little troublesome for the bulls because it fell the hardest by the end of the day. The index sank 20 points, or 0.9%, and closed below the 2,300 level at 2,289. This level was former resistance, and the index is right at support after trading to a high of 2,341 on Monday. The index should have powered its way towards 2,400, and there was something about yesterday’s move that felt like a bear trap.
This market feels like we are trying to catch a whale with a fish net, but we have been all over the movement inside this tight trading range. The hard part is trying to trap the market at the exact moment, but we are getting close. We went call option fishing yesterday as “insurance,” but our bucket is full of put options that could end up being a nice dinner. They are on ice right now so keep this in mind as we head towards a volatile next 3 weeks.
As we head to press this morning, Dow futures are off by 4 points to 10,392 while the S&P futures are down 2 to 1,108. The Nasdaq 100 futures are up a fraction of a point and are at 1,900. We have more notes on the current market environment in our Members Area, and we have updated the current trades to let you know exactly what we are doing and thinking.
We will be back at 1pm with another update.
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