World markets followed US markets to the downside overnight with Europe broadly lower and the Nikkei standing out negatively in Asia with a 1.5% drop. The rhetoric surrounding Syria continues to be sharper and more tenuous. Russia, which has long supported President Assad, disputes the US claim that chemical weapons were used by his regime, and basically warned that there will be “catastrophic consequences” if the US and its allies attacked Syria.
The correction that started with the “taper talk” has intensified with this geo-political news. On Monday the afternoon sell-off provided traders some clues to at least take risk off, and yesterday we got one of the biggest sell-offs of the year. Oil is also perking up this morning and breaking out a tight channel, and will be an ongoing worry with tensions focused in the Middle East.
Today S&P futures are near the flat line. We danced around the 100-day MA yesterday and closed a bit below it for only the second time in 2013. Today’s SPX pivot stands at 1629. The best set-up in my eyes would be a push below this, some acceleration downward and then a turn higher later in the day to create some type of level to trade against.
There is a cluster of support between 1601 and 1626. The June lows stand at 1560ish, which also is where the 200-day moving average currently lives. There is some resistance stands at 1637 then 1645 with a bigger area at 1653.
Many intermediate-term uptrends have been broken, and there have been many signs to take down risk well before yesterday. At this point, be purely tactical until we see a new “signal” that a new Day #1 bounce could be forming. Whatever stock or group you are trading I trade a level vs. a level for small paper cuts rather than risking a “gusher” by not using stops.
In today’s Morning Call we will check the temperature and map out levels in various sectors.
The Homebuilders ETF (NYSEArca:XHB) has been showing relative weakness over the last few months since the taper talk began, and it showed relative weakness again yesterday. XHB finished down 2.32% and looks like it could be close to triggering a bearish head and shoulders pattern. It’s already below the 200-day.
The Financial Sector ETF (NYSEArca:XLF) has shown concerning relative