Tuesday, September 2, 2008

Let's See If We Get Some Downside Follow-through Tomorrow

Good evening traders. Here are the major indices, which do not look very good to me right now. I want to see them break through the 50 day moving average tomorrow because if they do, then I think perhaps a new downtrend could be in place. We do have to remember that every time over the last two months that it looked like we were finally going to breakout and run or breakdown and run, the market decided to just run in place a little longer. Hopefully that won't happen here, but it is something to remember.

S&P 500, Nasdaq

The Nasdaq 100 really looks bad today and did break through the 50 day moving average on heavy volume. Volume was heavy across the board today and perhaps that is a sign that today's reversal will turn out to be very meaningful. The VIX also shot up today and I mentioned this weekend that I was watching for a breakout here as a possible confirmation of a new downtrend starting. Most signs seem to be pointing to that fact.

Nasdaq 100, Vix

Here are the two positions I took today. I want to see immediate follow-through tomorrow in these stocks or I will be out with small losses. Today's reversal will mean very little if we are up 200 points tomorrow, which given this psycho market, isn't out of the realm of possibility.

SOHU, SKF

After going through my scans, it was clear that most of the damage in individual stocks was in the commodity area. That's not to say that there weren't some very bearish reversals in other places like tech, but all commodities were hit very hard today, many putting in possible downside breakaway gaps. The hard part is now when to short these. I discussed earlier that with the weekend weather situation, there really wasn't much of an opportunity to get short these in a safe way, other than chasing the gaps today, and that probably didn't get you very far. Doing so now is probably a little risky, but I may take a shot at one or two if they can get a little intraday bounce. The four I have below look like the best possibilities because I don't see a lot of support below them except for their former lows. Too many of the stocks I saw today still have moving averages to deal with below them so I passed on those. Overall, this is a risky group to short right at this moment, but there may be a big reward too.

CLF, ANR, CHK, SWN

While the oils may bounce or at least stretched here, I think the agriculture stocks still look like possibilities. I am already in MON short but could look at a few of these, several of which look to be forming the right shoulder of longer-term head and shoulders patterns.

FMC, TRA, CF, TITN

A few other commodity plays include the shippers (EGLE and DRYS), IIIN and SQM.

I am mainly playing the financials via SKF but will look at certain individual stocks if the chart is setting up nicely. These are some of the ones I am watching.

OFG, EVR, FCSX, WCBO

Other financials I am watching include MER, OSBC, CMO, ZION, and V

Casinos are still a group that I am watching carefully, and a few look like they are forming head and shoulders patterns. It is just a volatile group, however, with wild swings.

PENN, LVS, WYNN, BYD

Finally, a group of tech and other stocks that I will watch tomorrow for breakdowns. My attention will probably be on this group compared to some of the others.

AFAM, VISN, CREE, MSTR
BIDU, GTLS, SINA, DV
All Charts from Telechart2007, Courtesy of Worden Brothers, Inc.

Others to watch from this group include QLGC, OSTK, CGNX, CDS, TXI, OEH, and WFR.

Not much else to say other than let's see what tomorrow has in store. I am not looking at any longs right now - I continue to see very few in my scans - and will selectively short as opportunities present themselves. Be careful overall because this market has a way of frustrating a lot of traders, but it looks like we are probably heading lower over the next few weeks. Good luck Wednesday.

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