Market Summary
David Chojnacki, Market Technician
After Thursday's big drop and violation of key technical levels, we were expecting some follow through on Friday. The market did not disappoint, as the major indices gapped down at the open and continued a disciplined sell-off throughout the day. Once again, key technical levels were broken and the selling broad based. There was blood in the streets by the final bell. At the close on Friday, the DJIA and S&P collapsed, falling 3.1%, and the NDX, the big loser, was down 4.2%. Breadth was decidedly negative, 5.4 to 1, on double the normal volume. Options expiration helped to add to the volume. ROC(10's) declined and remain in negative territory. RSI's are in the 20's and suggest over-sold levels. All three major averages closed below their lower Bollinger Bands. For the week, the DJIA fell 5.8%, the S&P dropped 5.7%, and the NDX moved down 7.3%. The VIX gained every day last week, closing at 28.03. It was up 218% for the week and up 46.4% on Friday.
Trading Trends
MAJOR INDICES Short term support and resistance level | |||||
| DJIA close 16459 | SP500 close 1970 | N100 close 4197 | |||
16400 | 16500 | 1962 | 1972 | 4175 | 4200 |
16250 | 16750 | 1950 | 1988 | 4150 | 4222 |
16117 | 17000 | 1937 | 1996 | 4125 | 4250 |
16000 | 17125 | 1925 | 2000 | 4114 | 4275 |
15885 | 17250 | 1912 | 2012 | 4100 | 4300 |
1900 | 2025 | 4089 | |||
1875 | 2027 | 4075 | |||
1862 | 2044 | ||||
2050 | |||||
DISCLAIMER LANGUAGE -ALL PRICES NOTED IN THIS PUBLICATION ARE AS OF THE CLOSE ON TRADING PRIOR TO
TODAY'S DATE, UNLESS OTHERWISE INDICATED
This publication is neither an offer to sell nor a solicitation to buy any securities mentioned herein. The information contained herein is based on data obtained from recognized sources that are believed to be reliable. Street One Financial LLC (S1F) have not independently verified the facts, assumptions and estimates contained in this publication.
Accordingly, no representation or warranty, expressed or implied, is made as to, and no reliance should be placed on, the fairness, accuracy, completeness or correctness of the information and opinions contained in this publication. The information contained in this publication is not and does not purport to be a complete analysis of every material fact respecting any company, industry, ETF or other security You should consider the investment objectives, risks, and charges and expenses of the Fund carefully before investing. The performance data quoted represents past performance. Past performance does not guarantee future results. The Fund's investment return and principal value will fluctuate. Upon redemption, shares may be worth more or less than their original cost. The Fund's current performance may be lower or higher than the performance data quoted. Go to toll free telephone number or Web site to obtain performance current to the most recent month-end. The average annualized total returns reflect the deduction of the Fund's maximum sales load. (When also showing non-standardized performance, if the sales load is not reflected, the disclosure must state that performance does not reflect the deduction of loads or fees and, if reflected, would have reduced performance.)
You should read the prospectus carefully before investing. You should consider the investment objectives, risks, and charges and expenses of the Fund carefully before investing. Many of the securities mentioned in this publication involve a higher degree of risk and more volatility than the securities of more established securities. For these and other reasons, the investments discussed in this publication may be unsuitable for investors depending on their specific investment objectives and financial position. Each investor should complete his or her own additional investigation and assessment prior to making investments in any securities. You should consider the investment objectives, risks, and charges and expenses of the Fund carefully before investing Transactions in securities mentioned herein may be affected only in those states where such securities are qualified for sale.
Street One Technical Analysis LLC is an independently owned Company from Street One Financial LLC (S1F). S1F is an independent Company specializing in ETF's, equities, and options utilizing the Broker/Dealer services and licenses of Precision Securities, LLC, a fully registered Broker Dealer and member of SIPC/FINRA. S1F specializes in agency ETF/ETP, equities, and options trade execution. On the ETF/ETP end, S1F may work with the ETF issuers to understand their products more thoroughly and how they can complement an investor's portfolio.
Data sources include ETF Database, ETFTrends.com, IndexUniverse.com, Google Finance, and Bloomberg data and at times other data sources are utilized. Leveraged, Inverse & Leveraged Inverse Conclusions and Risks 1) Leveraged, Inverse, and Leveraged Inverse (L&LI) ETFs generally capture a high percentage of their expected daily returns, particularly on a net asset value basis. 2) L&LI ETFs are not appropriate for all investors. However, we believe they can be appropriate tools for some investors looking to make short-term tactical trades if they perceive a high likelihood of a strong market move occurring in a relatively short time period. In strong trending markets, being on the right side of the "trade" with L or LI ETFs can lead to very strong returns. 3) Investors should not expect these ETFs to deliver total returns linked to their benchmarks over any period other than daily. The effects of compounding and the daily re-leveraging or de-leveraging that occurs with L&LI
ETFs can lead to unexpected results over the long term. As a result, we believe longer-term investors should consider regularly rebalancing positions. 4) Trendless markets, particularly those with a high level of volatility, can lead to substantial relative underperformance of L&LI ETFs. 2) Leveraged and Leveraged Inverse (L&LI) ETFs typically utilize futures and equity swap agreements. The use of these derivative instruments increases risk and enhances the possibility of tracking error.
Relative to traditional ETFs, leveraged, inverse and leveraged inverse ETFs typically have higher costs and lower tax efficiency. 3) The effects of compounding can lead to significant deviations from traditional benchmarks over longer time periods. For example, if $100,000 is invested in an index that increases in value by 10% on day one and then decreases in value by 10% on day two, the investment will be worth $110,000 at the end of day one and $99,000 after day two. However, the value of a security that doubles the daily performance of the index would be worth $120,000 on day one and $96,000 after day two. Thus, the index is down 1% after two days, a doubling of which would be down 2%. However, the security attempting to double the return of the index is down 4%. Investors should consider carefully the potential impact over longer periods. MLP and MLP ETF Risks Individual MLPs are publicly traded partnerships that have unique risks related to their structure. These include, but are not limited to, their reliance on the capital markets to fund growth, adverse ruling on the current tax treatment of distributions (typically mostly tax deferred), and commodity volume risk.
For tax purposes, MLP ETFs are taxed as C corporations and will be obligated to pay federal and state corporate income taxes on their taxable income, unlike traditional ETFs, which are structured as registered investment companies. These ETFs are likely to exhibit tracking error relative to their index as a result of accounting for deferred tax assets or liabilities (see funds' prospectuses). The potential tax benefits from investing in MLPs depend on their being treated as partnerships for federal income tax purposes and, if the MLP is deemed to be a corporation, then its income would be subject to federal taxation at the entity level, reducing the amount of cash available for distribution to the fund which could result in a reduction of the fund's value. MLP funds accrue deferred income taxes for future tax liabilities associated with the portion of MLP distributions considered to be a tax-deferred return of capital and for any net operating gains as well as capital appreciation of its investments; this deferred tax liability is reflected in the daily NAV; and, as a result, the MLP fund's after-tax performance could differ significantly from the underlying assets even if the pre-tax performance is closely tracked. Commodity ETF Risks Commodity ETFs may be subject to greater volatility than traditional ETFs and can be affected by increased volatility of commodities prices or indexes as well as changes in supply-and-demand relationships, interest rates, monetary and other governmental policies, or factors affecting a particular sector or commodity. Currency ETF Risks Investments in currency involve additional special risks, such as credit risk and interest rate fluctuations. ETFs mentioned at times may have material exposure to small cap and/or international securities that may have higher levels of risk and volatility than other ETFs.
Registered Representative of and Securities Products offered through Precision Securities, LLC Member FINRA SIPC. Street One Financial LLC (S1F) and Precision Securities LLC are not affiliated entities.
Major Economic Reports Today
No major reports scheduled
Long term technical bias to the upside is being challenged. The DJIA and DJT are violating Dow Theory rules and suggesting a further breakdown, with DJIA down 10.1% from its high. The major indices have broken the 50WK-MA, where they have found support on 2 occasions in the last 3 years. We are watching 1862 in the S&P and 3765 in the NDX to confirm a longer term breakdown. Short term and near term technical bias is to the downside. At these over-sold levels, we may expect a near term bounce, but that's not reflected in this morning's futures. Below 1996 in the S&P and 4222 in the NDX, the short term bias remains to the downside. China is down 8% overnight. Europe down 3-4%. Futures are CRASHING. Another ugly day.