MomentumOptionsTrading.com Morning Update for 7/11/2014
The market experienced a Keith Jackson moment on Thursday as he made today’s headline a famous quote for out of control situations. I have mentioned the recent triple-digit swings in the Dow and a rising VIX could spell heightened volatility into July and that is exactly what is happening.
Headline news has become much more in focus and along with the slew of 2Q earnings reports due out next week, I expect the unexpected to continue. The end result of a Whoa Nelly is that after the fact it produces a surprise, shock or awe at the unexpected behavior. (read more…)
The Dow fell 70 points or 0.4% to settle at 16,915 on Thursday. The blue-chips tanked 180 points on the open to a low of 16,805 before cutting the losses and pushing a high of 16,980. However, the final hour produced another back test to support with 16,900 holding. I have talked about how a break below 16,800 would be bearish and the bulls were tested yesterday. A close above 17,000 would get new highs back in play.
The S&P 500 slipped 8 points, or 0.4%, to end at 1,964. The index tested a low of 1,952 within minutes after the opening bell but also recovered following the 20-point loss to reach 1,969.84. The fade off the highs ended with the bulls holding support at 1,950 while closing above 1,960. A close above 1,970 and more importantly 1,975 keeps fresh highs in the mix.
The Nasdaq dropped a double-deuce (22 points), or 0.5%, to close at 4,396. Tech was punished for a 68-point loss at the start of trading and tested 4,351 before rebounding to clear 4,400. The bulls nearly got back to even after pushing 4,415 but near-term support was stretched after following the close below 4,400. There is further risk to 4,300 if 4,350 cracks while a close above 4,400-4,425 would be bullish heading into next week.
The Russell 2000 sank a 12-pack, or 1%, to finish at 1,161. The small-caps were once again the weakest link as they traded down to 1,151 and led the bandwagon lower. The bulls held the 1,150-1,160 levels but a close below 1,150 would be very bearish.
The S&P 500 Volatility Index ($VIX, 12.49, up 0.94) went ballistic as it soared past 12.50 and made a run to 13.23 on the bears opening ambush. Once the dust settled, the bulls failed to hold the 12.50 level and this could be a warning sign. I have talked about wiggle room up to 13.50 and I am applying the “no flinching rule” I have used in the past until the VIX closes above 15. This means I won’t aggressively start looking for short positions until this level is triggered.
One of the current option trades will be in play this morning as the company is reporting earnings as I go to press. I have given specific trade instructions to exit the position on good news so please read them carefully. I have also updated the other current trades as well.
Stay locked-and-loaded throughout the trading session as I could have Profit Alerts or possibly New Trades ahead of the midday update. If not, I will talk with everyone around noon.
Heading from desk to press, futures look like this: Dow (+8) S&P 500 (+1); Nasdaq 100 (+4).