There are some green arrows around the world as markets reached some pretty oversold levels.
I’m sure the media has caught you up on the fact that there is a major manhunt in Boston. At the time of my writing this, one suspect has been killed and the other is at large. I hope there are no more innocent lives lost and I do hope that he is taken alive for questioning. I'm not sure there is just one left out there.
SPX futures are moving higher this morning by 8-10 handles, rallying off the 1541 level once again. Tuesday they were as high as 1573, so a big travel range to break important support at the first attempt is sometimes difficult to do. If this "head and shoulder" pattern is valid, which I think it is, SPX probably doesn’t get above 1565ish in the coming sessions as this right shoulder tries to build.
GOOG and MSFT reported higher than expected earnings. GE missed expectations and is now lower and MCD faces the same story. Blackstone pulls out of bidding for DELL over finance concerns. $13.65-$14.00 was more than fair in my humble opinion.
Banks are still under pressure and this could continue for a bit longer. Some are tactically trading them back and forth now. I feel they need time.
There are lots of “key inflection points triggered for adjustments.” If you honor the key areas, you can then test lower levels for cash flow or at least be out of the way.
Last Friday, $GLD at 148.50 was a spot to take notice. If you sold then, you have the luxury to play a bounce from the low $130 area. $136.75 should start a gap.
On Monday, SPX sliced 1575ish. If you sold there or made adjustments, you have the luxury to test 1540 area a few times before it potentially becomes an action area of its own.
AAPL sliced $419 on Wednesday, giving some a spot to make adjustments to sell and potentially get short. If you sold you saved another 30 points of pain, but if you got short that also was a nice spot to initiate. I will revisit this Tuesday.
At this point, I am back to tactical trading, taking trades both ways without carrying positions. Lots of intermediate guys went to this approach and we can see continued weakness before finding a pivot low in the next days/weeks/months.
If you are a macro investor, I still think you stay the course. I don’t think the highs of the year are in. In my humble opinion, this is not 2007, as SPX at 1541 is only a 3.5% pullback from a market that was up 12+% so far this year.
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Disclosures: Scott J. Redler is short SPY.