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1:00pm (EST)
The bears are continuing their attack on the bulls as they try to pin the market under support before the close. Economic news has been light this week but is picking up starting with today’s Existing Home Sales. The report showed sales increased 2.3% from the prior month which was below expectations for an increase for 3.2%. The supply of homes dipped to 6.4 million from 6.5 million while the average home price slipped to $187,300 from $188,800.
Of course, today’s FOMC minutes should have a much bigger impact on the market when it is released at 2pm (EST). The suit-and-ties will be looking for clues on which new twist the Fed can pull out of its hat if more quantitative easing were to be enacted. We doubt the report will provide much ammo which could be a disappointment as the Fed will be real careful with their wording ahead of Ben Bernanke’s end of month speech in Jackson Hole.
There were a number of “famous” analysts who stepped in front of the bull train as it was reaching new highs yesterday which could also be weighing on the indexes. Goldman Sachs (GS, $104.65, down $0.67) warned its “muppets” to abort stocks ahead of a possible fiscal cliff saying the market could fall 10%-12% if the zombies can’t come up with an agreement before the elections.
Another slick talking pro said the S&P could tank 20%-25% and trade down to 1,075.
Of course, other Wall Street analysts came out and said the S&P 500 could trip 1,575 by the end of the year. Another analyst said without a doubt the S&P would power past 1,600.
We did a lot of chart work over the weekend and we aren’t sure if these people did the same but we went on record saying the market will move 5% in September and 10% by yearend. However, we are watching support and resistance to help us find the next trend and it is too early, in our opinion, to side with either the bulls or bears at this point.
We mentioned in our Weekly Wrap the market was poised to test its 52-week highs and we used that opportunity to cash out a number of call option trades this week. We thought there would have been a more gradual climb to the highs which was going to last until today, ahead of the Fed minutes, and then we would see the “fluff” past the 52-week highs but yesterday’s pullback made us cash out a little earlier than we expected as we wanted to lock-in profits.
We are still trading light but once the next trend is in place, we plan to get really aggressive. We have plenty of room to go long or short and we would rather use the technical clues to figure out where the market is headed rather than buy or sell into the hype of QE3 or a saved euro. Technical analysis will always trump headlines which is why we say it’s too early to tell which direction the market is headed. Support and resistance will play a bigger role than the actual news.
We will know soon but it’s not too early to see a major move could be coming.
The market is at session lows with the Fed minutes due out in an hour. As we head to press, the Dow is down 80 points to 13,123 while the S&P is lower by 6 points to 1,407. The Nasdaq is off 10 points to 3,057. The bulls are holding support so let’s see how this plays out.
Subscribers, check the Members Area for the updates as we are taking action on a trade that is up nearly 40%. Also, stay locked-and-loaded in case we take action on other trades or open new ones.
Market at Support, Bernanke on Deck
Friday, August 31st, 2012
9:00am (EST)
The market closed right at support like we figured heading into today’s big event. We are pretty sure Ben Bernanke checked yesterday’s closes on the indexes so he is well aware what his carefully chosen words could mean for the market.
The Dow dropped 107 points, or 0.8%, to end at right at 13,000. The blue-chips traded in the red all session long and dipped to a low of 12,978. Today’s action could produce a 200-point swing on the Dow which would be the next wave of support for the bears (12,800) or a rebound back to resistance for the bulls (13,200).
The S&P 500 fell 11 points, or 0.8%, to settle at 1,399.48. The index traded to a low of 1,397 and could face a quick test to 1,375 on continued weakness after failing to hold the 1,400 level. The bulls could easily reclaim 1,410 or even 1,425 on bullish Bernanke comments.
The Nasdaq declined 32 points, or 1%, to finish at 3,048. Tech was unable to hold the 3,050 level and could test 3,025-3,000 on a continued pullback. A run back to 3,100 could be in the mix if the bulls get some good news.
The Russell 2000 closed at 808, down 9 points, or 1.1%, while the S&P Volatility Index ($VIX, 17.73, up 0.67) finished above 17.50.
Futures are showing a bullish open and look like this: Dow (+113); S&P 500 (+12); Nasdaq 100 (+27). Bernanke is no E.F. Hutton but everyone will be listening starting at 10am.
We have added several new possible trade candidates to our Watch List which could be opened once we get a good feel on what might happen. Subscribers, check the Members Area for the details and be on the lookout for New Trades or possible Trade Alerts if we need to take any action before our midday updateWe have added several new possible trade candidates to our Watch List which could be opened once we get a good feel on what might happen. Subscribers, check the Members Area for the details and be on the lookout for New Trades or possible Trade Alerts if we need to take any action before our midday update.
Tags: Bernanke Jackson Hole speech, best options newsletter, call options trading, VIX index
Posted in Market Analysis, Market Commentary, Sectors, VIX, Watch Lists | Comments Off