The short-term resistance of the 9 day moving average, along with some descending trendlines, proved too much for the indices to overcome early in the session. Much like yesterday, when the buying didn't really kick in until the last hour, the selling today wasn't really that strong either until the last hour or so. Based on today, it looks like the indices will break their recent lows and that the Nasdaq might be the third major index to test its March lows. I have no way of knowing for sure that we will sell off again tomorrow, but today was certainly very bearish. The only solace was that volume was lower.
Dow and S&P 500
We are obviously still very oversold and I still think we need some capitulation before we get a bounce that will last more than 24 hours. That's my guess of how this leg down of this bear market ends, but it is possible we just chop around in this area for a few more days and put a bottom in that way. The Dow and S&P could be forming something like that now. The only problem with this is that if it happens, that could just be a way of working off the oversold conditions before heading even lower. We'll see what happens. The Market Monitor remains at extreme levels on two of the three ratios, but the most important one still has not hit the extreme level that signals a likely buying opportunity.
These are the shorts I took today. All of them were in the commodity sector, which in my opinion still has some room to fall due to the momentum that was in these groups. Since we are so oversold, I realize that there can be a massive bounce at any time, so I will keep my stop losses tight on these until I hopefully have a little cushion on my positions. I try to always be prepared that I am totally wrong in my thinking because at least half the time, I probably am.
One way I chose between different shorts is by how much room they look to have to fall. The ones I chose today could drop a big amount if they break through their recent lows.
My Shorts From Today
I still think the oil stocks are done here for the short to medium-term time frame - not necessarily crude oil itself, but the stocks are looking like quite a mess. I am still in HK and I thought about going into a few of these today. The setups aren't perfect, but it is more a hunch that they are due to fall further with all of the hot money that has run these stocks up so much. If you play these, make sure to use a tight stop just in case.
BEXP, CLR, CRK, PVA
Here are some other stocks that look like they could breakdown soon. Hopefully, you are already short, because it is a difficult time to start new ones due to how oversold we are. I am a little nervous about the ones I took today, but the market does look like it may have a little more downside left, so for now, I will go with it.
HPY, NFLX, VLTR, AMZN
No longs today because there is no reason to put any up. I continue to do my scans on the long side and look for stocks setting up in nice bases so when we do finally bottom in the intermediate-term and possibly set up a nice bear-market rally, I will know which stocks to focus on. Right now, I still am not seeing very many, and that is not a good sign.
I was trying to think of an optimistic way to look at things right now, and I hope I found one. If we do get a washout soon, that has the potential to sort of wipe the slate clean for this market. I can't think of a better time to go into earnings season that at the start of a potential rally, where earnings-related breakouts like ENER and FSYS from the last quarter can produce very nice gains in a short period of time. That is what I am looking forward to now - the possibility of catching some nice moves in those type of stocks. The earnings trade remains one of my favorites and hopefully we will get a few good ones in the upcoming few weeks. Right now, things remain tough, and cash remains the best option overall besides selective shorting, but a better time will come. Remain patient and be ready to pounce if we get some bullish signs anytime soon. I think we are close, but not quite there. Best of luck Wednesday.