disappointing..

Okay..only mildly disappointing…

You’re probably looking at the title and saying what was so disappointing about today, SPX up 3 pts day after the recent  ~10+% rise.    Well,  we’re not even disappointed that market was not up greater, we’re disappointed because we can’t get a decent red pullback to relieve the overbought conditions and let others come into the Bull playground.    You see,  we didn’t  have sellers today and we didnt have buyers even like us already on board the bull train to press higher or/ new buyers step up.   Nothing changed from Friday and the trading conditions noted in DJIM weekend report continued,  notably any weakness getting a light bid.    If you’re on a Level2 platform, you can clearly see a lack of any meaningful size bids or asks to make any stock move in either direction.    If something did move today, it basically reversed back due to lack of conviction.    A few DJIM stocks making intraday new highs are prime examples of all this, (excluding HITK )… ININ TBI SWI  gave back the new intraday highs and others with the real strong earnings like JDAS, ATHR AAPL  are just stuck in the Nazzy/ Tech oxygen tank after it's trip to the moon.  It's unfortunate as far as timing that the latter 3 gapped into the middle of the rally giving them little room to roam higher at this point.  All this just made for a flat boring day, but digestion is still better than indigestion! 

So..until one group gets aggressive, we’re stuck in what looks like June trading all over again.   It will probably involve a surprise catalyst to initiate a move.   Today,  some were saying it was a negative that we sold into the Home sales number,  but this wasn’t a surprise catalyst as in recent weeks the numbers, sector options action had pointed to this data.   It wasn’t enough of a catalyst for the Bulls to run through the streets and it wasn't really a sell on the news in our view
 
Positives to take away, include,  Financials strong in all sub groups  and TRANS  keeps rolling and a big part of this recent rally (recall July 16th we said FDX exploding over 200MA was a positive) and allowing rest of market to digest,  while showing this market is probably capable of rotation to keep on going forward.  In this case as NAZZY tech takes a much needed breather.  Bulls have time on their side!. Also, some M&A activity today maybe a start to some more good noise in this area.

...How'd we get here?

‘Here“…is seemingly nowhere as we sit below SPX1K again and many jumping on the train last week are asking this question.   Before the 1st trading day of August, we discussed a break of SPX 1K was inevitable after painting a Bullish outside month to conclude July.   Once we accomplished this feat in short time, we immediately warned that an overshoot spike would be the beginning of a reversal if 1014 was hit and the market would “blow off some premium steam”.   Since Fridays intraday high spike to todays low..(26 pts < 3% has been blown off).   Today as 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.   We’re watching this level closely this week,  today’s volume was quite low in all probability awaiting FOMC.   FOMC, not much is expected,  still it should swing the market either way just because we sit at support.

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.

What’s important to understand for future reference are some points to recognize as a trader to be a head of the curve.   Once we broke SPX1K, we titled a journal “ PMI= SPX1= Market too Giddy”.  That day global PMI pushed the market higher as all of a sudden these PMI’s were the holy grail as seemingly every  Johnny come lately’ was coming in bullish.   We wondered if this investor was really that behind the curve and now the smart money would begin to sell off to them over SPX1 (Aug 4).   This relates to the overall bullish sentiment getting too high, thus too giddy.   Other bearish points we have discussed recently are the mid/ small caps earnings winners not going higher which signals a short term top for us and most recently the failure of the COMP all leads to our cry here…’we want broad particpation’ and we’re not getting it.   Also our NYSE A/ D line is turning.

A few earning plays from this Q did look good today.  FIRE  continues to make new highs,  PWRD  made a nice one day reversal after selling off on excellent earnings.  EJ  beating on top of Aug range ahead of EPS.  ABVT, consolidating, flat lining well since EPS.  SXCI  and even STEC  is starting to shake off the offering.    But as noted yesterday, breakouts are a concern and just as we noted TBI  breakout was vulnerable as it gave it all back.   We’ll feel much more comfortable with our niche once this action stops. We also added some TXIC  today due to earnings, China and business related make the float even that more attractive to go higher.    Anyways, today a few more of our niche plays are looking better, hopefully a sign of things to come.

Today,  financials down 3% with banks down 5% being the weakest sub group, we have Tech doing nothing since MSFT earnings and Commods  needing a well deserved rest all intertwining here.   Not simple to figure out we need someone to pick up the slack.