Morning Call: Market Could See End of Quarter Profit Taking
We are now going on day three of the slide that started Tuesday afternoon. After a big move from the December 20th Gap and Go selling some longs into the end of the first quarter#1 made sense. There is always a re-shuffle that goes on from Qtr. to Qtr. so the market needed to prove to me that a portfolio approach still made sense. Overseas markets continue to slide as China slowing fears continue to rise and sovereign debt chatter continues to make rounds about Spain and some other European nations.
As of now, this is the same “type” of correction we’ve seen during this multi month move. The question is, will it be different this time? Investor’s Business Daily put the “Big Picture” in “Rally Under Pressure”, this is the first time they’ve done so since December 20th. So If you didn’t respect my warnings on Tuesday afternoon, you should acknowledge their perspective. One more distribution day and then it turns into “Market Correction”, so the next 1-4 sessions will be important to watch also considering we get to see what the “Composure” feels like once this first quarter is in the books.
Micro Support on the S&P is yesterday’s low of 1397, the corresponding level on the SPY is $139.64. The 20-day moving average for the S&P is 1387 (SPY is $138.94).
S&P is now the 10day moving average at 1404 (same level for SPY is $140.46).
Retail (NYSEArca:RTH) looks a bit tired as well. I would watch this group closely to see if they can maintain their leadership composure.
I do think the prudent thing now is to be very flexible. I will just actively trade both long and short until I get more clarity on what the next bigger move will be. Depending on your time frame, I feel you should do the same. Longer-term swing traders should be in tier 1 at most right now.
Momentum and intermediate trend watchers who can make quick moves should have went to cash or net short with me Tuesday.
The McClellan Oscillator is on -10ish – so we are not “very oversold” yet. But if you didn’t cover some shorts yesterday this down open would be a decent spot.
Zynga (NASDAQ:ZNGA) is a stock I’ve played a few times, and they priced their secondary at $12. I will see if there is an opportunity to buy in that area for a active trade or a swing long.
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