..1014 was the new 950..

Nothing happened over the weekend and/ or overnight to suggest SPX ES would have been down 22 pts premkt.  Except one thing, the globe digesting the poor Retail and Consumer numbers in US over the weekend and acted by aggressive profit taking.   Simply, this was the primary reason for the follow through action globally and in SPX futures.  Even though we warned here the retail # might be the start of something we’ll look on after the fact as a summer top,  traders/ investors probably didn’t unload due to the market seemingly shrugging off the news in Thursday and Friday trading.  We also pointed out last week another negative we saw and this was highlighted in a WSJ article over the weekend (corporate credit trading).  Trading by our own guts last week instead of following market action would have suited us better.  

Before Wednesday trading….“…The Friday SPX failure to close over 1014 is reminding us of the June attempt to get over 950.  A break to SPX 956 and than a close of 944.  We think the trade going forward may resemble the aftermath of that day.  Have a look at the daily“.  (See chart below).   We are confident this is the case now, a summer top was put in that Friday.  Unfortunately, eerily,  short term the chart looks even more similar now and in the longer term post- Labor day positive.

So,  if you got stung by the gap down of 20pts on the SPX,  you’re not alone.   There is nothing you or we could do!.   We noted last week …“…the SPX futs touched down to 990/ 993 Cash important support, we were in danger of this reversal continuing to next 982S and than even 970S later on.   Simply,  we feel stops are laid out just below 990 and this would induce a further drop".  Well… they were hit before we got of bed and it took us straight down.    It was useless to sell anything into a gap that hits support levels we’ve noted of 982.   As far as we’re concerned,  any losses today are paper losses with the gap hiding 3 actual positives….Empire showing manufacturing growth was above expectations across the board,  NAHB housing suggesting gains in new home sales are still ahead and Master trust #’s.  Maybe the market will digest this overnight, today it was on one track mind ignoring everything positive after seeing a global sell off underway.   These might  not be overwhelming positives,  but they do make the Eco data interpretations that more confusing and unpredictable.   Before, we had positives (tailwinds), now we have headwinds and tailwinds making for an environment difficult for even the best economists to figure out.  

So, what do you do?.  We just hold the longer bull side as this is still 1/ profit taking 2/ shorts not pressing at these levels, upside risk remains for Bears.   Still,  unfortunately, we did have our summer top last week.  We would use any upside close to 1000 at this point to unravel positions unless some great eco catalyst appears.  We would have to digest the action if it gets us there, but at this point that would be the strategy.  Part of the thinking is shorts would begin to put on positions higher after missing this gap down.   Still, we don’t think any action up or down will not be too suggestive of things to come until we are post- Labor day as volumes will probably deteriorate in the next few weeks.  Today was probably a great summer sale on many individual stocks, not SPX.

Today.. supply showed up in small and large caps, nothing was saved especially the China stocks following a 6% decline in the Shang.  Tomorrow, some demand will show up, the question is how much and will answer how far we bounce.