Monday Market Movement – Looking to Regain Some Upside Momentum

The turmoil continues

Already this morning the Futures were down 100 points but back to flat into 8am.  Of course, nothing that happens on a Monday has any meaning for the Markets as it's generally a low-volume affair with little news or data driving things towards real change.  We laid our our bounce lines for the major indexes last Thursday and congratulation to those of you who followed us into those longs and caught that nice rally into the weekend.  The summary of our bounce levels is:

  • Dow (/YM): 25,450 (weak) and 25,700 (strong) – now 25,317
  • S&P (/ES): 2,775 (weak) and 2,750 (strong) – now 2,766 
  • Nasdaq (/NQ): 7,100 (weak) and 7,250 (strong) – now 7,157 
  • Apple (AAPL): $223.50 (weak) and $236 (strong) – now $222 
  • Russell (/RTY):  Anything below 1,552 is catastrophic – now 1,545

That's right, I forgot about the Russell.  It was the small caps index that gave us the early indication the rally was breaking down and now they are going to give us an early indication as to whether this is the end of a small correction or just the beginning of a larger one.  

As you can see from the daily chart of the index, there's no recovery here at all in the broadly measured 2,000-stock index and these are the companies that are least able to adjust to the damage caused by Trade Wars and slowing US Consumer Spending so they do give us an early glimps of the things that will begin showing up in the S&P 500 over time.  

Meanwhile, we're skeptical about recoveries that occur on low-volume and without actual reasons – we much prefer to see the market move on upside reports or at least upside earnings surprises and not from single companies or even single sectors – like Friday's bank-driven rally.  For example, one of the recent hedges we added to our Short-Term Portfolio was featured in the 9/27 PSW Report, which was:

As I noted on Tuesday, we are already getting swamped by companies who are issuing negative guidance


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