Morning Call: Markets Recover from Big Overnight Losses

After trading sharply lower into the close yesterday, US markets continued to drop precipitously overnight and it looked like the Dow was set to open at least another 300 points. However, markets rallied in the early morning and then again in the last few hours to take us to what looks like a green open. The volatility is tremendous, even during non market hours.


The NYSE is now 20% off the highs after yesterday’s close. The action has been fierce, unforgiving, and has taken no prisoners! Even those with the right thesis had a hard time handling the volatility and relentless selling.

This is the type of action that can put stubborn traders out of business. This is the type of action that can cause hedge funds to explode. OR, this is the type of action can be the most profitable as volatility spikes through the roof and ranges expand. It’s not easy, though, and takes a lot of skill and discipline.

On 7/28 IBD put this market back in “Correction” as the Macro Head and Shoulders Top pattern formed the right shoulder. The pattern then triggered too the downside as 1249-1270 neckline was taken out.
The pattern met most technicians’ measured move around 1150-1180. Now it’s in the overthrow stage.
But you never know where that overthrow can go, especially when you have liquidations likely occurring
The action has punished any market participant looking for any type of macro accumulation. The only trades long have been intraday at key accelerated moments, which were not easy at all too catch.
With volatility and ranges wider than we’ve seen in years, now is a time to trade less size and manage risk above all.
The overnight volatility increased as most overseas markets went from Green to Red and back Green again many times. Korea was at one point down as much as 10% before paring losses. We are probably going to see that type of whipsaw action here today. A two way trade rather than a day like yesterday was just relentless to the downside, and it could be somewhat like last Friday when we went up a few hundred then down a few hundred several few times. This time the line to trade around is yesterday’s low of 1119. The Fed is in session today, so it will be important to watch for any announcement from them.
Resistance to watch if we get some relief: 1138-1142 is an easy snap back, 1150-1155 (area that we bounced back late afternoon), then 1169 the pivot from yesterday’s trade. 1180 will be a very tough spot to get through.
New levels of support: Very small one at  1102-1105 (this was last night’s support area), then a bigger one from 1075-1085. Then a major major level at 1040-1050 the 9/01 igniting bar that started the move last September.
When the 1250-1255 area I lowered my year target to from 1425 to1250-1300.
This means lower your expectations,  Make sure you are much more selective in the stocks you trade.
Make sure not to add into excitement. Take trades.
This is a broken market.  We can definitely get an oversold bounce at any time (probably today) but the trade has changed!
Scott Redler
Scott Redler is the Chief Strategic Officer of T3 Live. He develops all trading strategies for the service and acts as the face of T3 Live. Mr. Redler focuses on thorough preparation and discipline as a trader. Scott Redler has been trading equities for more than 10 years and has more recently received widespread recognition from the financial community for his insightful, pragmatic approach. He began his career as a broker and venture capitalist where he was able to facilitate relationships that led him into trading. Beginning his trading career at Broadway Trading in 1999, Scott moved on with Marc Sperling to Sperling Enterprises, LLC after establishing himself as one of the best young traders in the firm. As a manager at Sperling Enterprises, he maintained his status as a top trader in the industry while working closely with all traders in the firm to dramatically increase performance. Scott has participated in more than 30 triathlons and one IronMan triathlon, exhibiting a work ethic that also defines his trading. His vast knowledge and meticulous attention to detail has led to regular appearances on CNBC, Fox Business and Bloomberg, and he has been quoted in the Wall Street Journal and Investor’s Business Daily among other publications. Scott produces much of the media and content available to subscribers and followers. T3LIVE.com is an online financial media network and education platform that provides active traders and investors with market analysis, real-time access to strategies, and in-depth training from real traders, real-time.

*DISCLOSURE: Scott Redler is long (NYSE:SPY)

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