US markets were quiet for most of the day Tuesday, until the last 90 minutes when they broke out of the day's range and then came right back down into the close. The S&P and Dow finished narrowly in positive territory while the Nasdaq closed red. A Financial Times report that the European Unions was in talks to double the EFSF provided fuel for the rally, but enthusiasm quickly faded as futures turned South into the close. At an EU summit this Thursday and Friday, the continent's leaders hope to produce a renewed and strengthened Eurozone treaty, including tighter fiscal requirements and harsher sanctions for violating them.
From a trading perspective, the action has been tough to navigate intraday. With news out of Europe driving action in the market, intraday action has been thin and unpredictable. To capture big moves in this market, it seems like you must be a contrarian at the moment things seem most dire or rosy. However, such a strategy also carries significant risk in both directions given the gravity of the current crisis, and the firepower of the proposed solutions.
If you are leaning long in this market, it seems you must ignore the fact that solutions being presented are simply delaying potential calamity in the European and global economies. Policy makers are hoping to buy time for a meaningful recovery to occur, and if the economy doesn't cooperate the hole will only go deeper in the future. Technical traders cannot be overly preoccupied with why the market is behaving a certain way, but rather remain simply focused on the price action. That is easier said than done in this market, where technical composure changes nearly every day.
High beta tech stocks were weak today as most had big moves in the last week or so and rallied into resistance.
Gold and miners had a nice upside reversal today, we will look to see if that continues in the next few sessions. The agricultural group also woke up today after looking very weak. Banks are trying to hang tough to digest their moves off the lows.
The Oil Service ETF (OIH) needs time to absorb the recent move, but still looks to be forming a bullish reverse head and shoulders bottom. The Industrials ETF (XLI) also looks like it needs a few days before being back in play.
The T3Live Premium OFF THE CHARTS newsletter tonight will highlight some macro patterns I believe are setting up.
You have to either be a hyper scalper or a long-term swing trader to have success in this market, in my opinion, and that is very hard given the enormity of our problems. I am choosing to be flat in my active account for now, and wait for a better risk-reward scenario after getting frustrated on some longs today.
There is an inside range to trade against in the S&P, from 1238-1242 to 1260-1266. We really need to see if that breaks up or down before making any big decisions.
*DISCLOSURES: Scott Redler is flat
