Last week the market couldn’t bounce with any real conviction, and that weakness has translated into four straight days of bearish action. The technical damage was adding up; it was a matter of time before some of the stronger tech names started to crack. The important thing to watch was that important 1056 level in the S&P. Although we dipped below after the housing number, we have rallied back above and gotten back out of the danger zone. A close below 1056 would bring the 1010 lows from June firmly into play, even though this break is happening on a low volume trading week at the end of August.
Tech leaders are getting weaker, with some breaking down out of recent channels. Leader AAPL, which we often look at for conviction for the market, is weak and teetering near lows of the recent range.
Banks continue to make lower lows and couldn’t even get a small bounce with the rest of the market today.
These economic headlines continue to disappoint, and it’s not pretty. The existing home sales data today was the worst since 1995! Even this week in a light volume tape there are tradable moves and money to be made if you follow rules strictly. Right now, though, it pays to be in cash and flexible, because the market is at an important crossroads. Today’s low provides a tradable pivot, and if we break then we will certainly carry forward a bias short. If we can get a bounce with conviction we can start seeing which stocks held in best.
