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Check The Temperature Of Sectors For Clues On Short-Term Direction

August 12th, 2013

morningcallWorld markets are mixed this morning but China is now at seven-week highs, pointing to some signs of stabilization in the region (if you believe the data). The news out of Europe continues to be constructive but those markets couldn’t stay green so far today. Japan continues to struggle and is weak this morning on lower-than-expected growth data.

S&P futures are down 6-8 handles below last week’s pivot support of 1684. It will be interesting to see if the bears can get a close below that level and bring out more sellers. Next micro support is 1676 with a bigger area at 1671. Last week we talked about taking risk down when the bulls gave up the “line-in-the-sand pivot, which for me was 1698-1702.

Barron’s ran negative article this weekend on the S&P & the top trending story on several media outlets was Marc Faber’s call for a 1987 style crash, which I think is incredibly irresponsible.  I personally don’t think the highs of the year are in, but I’m back to tactical mode. With it being August-September after a 19% run in 2013, it makes sense to sit on  your hands a little bit. On an intermediate-term basis, the Bears have a little bit of control right now and the onus is on them to keep it. On A Macro basis, the bulls are still in full control.


There has been great individual stock action this year and it continued through the July earnings season.  At this point some stocks look like they need a rest and some look like they are simply “avoids.” You could make some money tactically during this corrective process and also find pivot entries for the longer-term entries, but I don’t think you need to be in a rush for those right here.

In today’s Morning Call we will check the temperature of some sectors for clues on short-term direction.

Check temperature of the sectors

The iShares Russell 2000 Index (ETF)(NYSEARCA:IWM) pulled in off highs last week but found support along its 21-day for the last few sessions. Intermediate-term traders could use last week’s pivot low of $103.47 as a spot to watch. The small cap index ETF that has been leading the market has been showing signs of fatigue, but it’s opening below that pivot. If it can’t reclaim it today then $101.94 is the next spot to watch.

The PowerShares QQQ Trust, Series 1 (ETF)(NASDAQ:QQQ) took a break last week but is resting above its 8-day. Last week’s pivot low is $75.87, if that level doesn’t get reclaimed this morning, the 21-day is $75.53.

The Select Sector Financial Slct Str SPDR Fd(NYSEARCA:XLF) already broke below its 21-day at $20.34. The sector has been a bit faulty lately and has given us some clues to take risk down. The 50-day will be important around $20.03.

The SPDR S&P Retail (ETF)(NYSEARCA:XRT) is also resting above its 21-day. There is also a bear flag formation developing in this sector ETF. Last week’s pivot low of $80.61 is a spot to trade against, and I believe the ETF could see the 50-day at $79.19.

The SPDR S&P Homebuilders (ETF)(NYSEARCA:XHB) is hanging by a thread at the

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NASDAQ:QQQ, NYSE:IWM, NYSE:XHB, NYSE:XLF, NYSE:XRT


 

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