Be sure to check out my latest linkfest over See It Market. There are some great reads on earnings season, the dollar, currency hedged ETFs and the power of saying 'I don't know'.
The broad market flopped, and the equal weight S&P 500's leadership was not enough. That said, the uptrend has yet to break.
The entire NYSE dashboard (price,volume,breadth) hit new highs with the market, but intense selling did significant damage to breadth at the end of the week. Again note the uptrend hasn't broken.
Fear has completely left the building via volatility term structure. We're still quite fearless even after Friday's major sell-off.
It's possible that the market has been lulled to sleep to any earnings issues. After the continuous cutting of earnings expectations quarter after quarter for years now we've got a potential boy who cries wolf situation.
The VIX was quite resilient after failing to hold under the key 13 level. Again, not a good sign.
Also, another concern is the recent rally has been all about bounces in the lagging materials/commodity space.
My buddy Andy Nyquist over at See It Market notes a MAJOR fibonacci extension level coming into play. As far as i'm concerned this is a reversal zone. The fact that the market has struggled to attain that level is disheartening.
The transports have lagged and now the consumer discretionary space is starting to join them. Looks like earnings season will tell the tale.
Some longer term trend lines of importance in play: Financials and Utilities
Quick commodity look...
Oil still looks great.
This could end up being a good time to buy gold. It's tried for months to break this major support area and it just hasn't.
About bonds..
The stock to bond ratio looks to have completed a rounding top. Another lower low here would be note-worthy.
TIP is testing major resistance after a false breakdown.
Investment grade corporate bonds started to fall out of a rising wedge, but were resilient. It's a big week here.
High yield corporate bonds, like the major indices, failed to sustain an important breakout level,
As for the long bond...the 30 year bond appeared to be forming a top, but TLT might just be a bull flag.
Overseas...
It's going to take a lot for the Asia ex-japan ETF to become unattractive. I'll be watching this space and the middle east & africa in the coming days and weeks.
For example, Thailand didn't mind the late week sell-off.
Alas, every time you pick up a news paper you want to run away from Chinese stocks. Ridiculous quotes, insane data points. It's out of hand. However, it's a good thing the government is trying to do something about it.
European indices broke numerous up-trends as well last week. I don't really have a feel or really cover these markets too much, but the notable weakness does support a global risk off situation here and now.
Russia's rally might be over after reaching it's main bounce target at the falling 40 week MA.
Psych...
Let's talk quickly about how to handle this major psychological swing from being bullish to being negative.
I think stepping away for a few days or even a couple of weeks is an awesome strategy. (this is does not include ignoring stops AKA letting losers run). You get to leave feeling pretty good about yourself. Your equity curve is looking pretty good. You get to charge the batteries while the market does whatever it's going to do. It being earnings season is just a bonus.
But you want to catch the downside? Fine..maybe if we get a weak bounce early in the week; buy some index puts a month out and set a target. That opens the door to bad habits though..
The point is, if your psyche is conflicted, who cares if you miss some market opportunity if you're more likely to screw it up anyways?
By the way, a market pullback doesn't mean anything for the average short-term trader. That is, unless you trade on a whim. Discipline will still win, it always wins.
Trade 'em well!
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