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Market Pullback Continues!

|Includes:Baidu, Inc. (BIDU), CREE, FCX, FSLR, GOOG, JCG, LVS, MELI, NFLX, WYNN

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In the Market Forecast this weekend, I told our members that "I'm not in a hurry to trade the long side to start the week."  On Monday, the market tried to bounce.  We did not chase any long plays.  Today, the selling that started last week continued with added pressure as inflation in Asia and debt fears in Europe gave more reasons for investors to take money off the table.  We jumped on downside plays in the morning and, in just a couple of hours later, cashed out on some quick winners:

November 16, 2010
08:37 | HappyTrading BIDU ($103.90) Sold to Close 11P105 Nov 105 put, at $2.70 +46%
08:33 | HappyTrading BIDU ($104.10) Sold to Close 11P260 Nov 260 put, at $2.60 +41%
08:28 | HappyTrading NFLX ($164.50) Sold to Close 11P170 Nov 170 put, at $7.10 +29%
08:14 | HappyTrading BIDU ($103.30) Sold to Close 11P105 Nov 105 put, at $3.00 +62%

In the Trading Room, we were trading on more puts plays, including FSLR Nov 140 and 135 puts:
November 16, 2010 7:18 AM
FSLR
getting weaker...

November 16, 2010 8:55 AM
FSLR
140 puts pretty much doubled from this morning.

November 16, 2010 9:39 AM
FSLR
testing $134....

November 16, 2010 11:26 AM
FSLR
got a nice scalp on 135 puts; ran pretty fast from $2.55 to now $3.6, after GLD got denied at $131...

November 16, 2010 11:29 AM
FSLR
$2 drop in 10 minutes!

November 16, 2010 11:38 AM
FSLR
to $130?

FSLR did end up going briefly below $130 before bouncing up to close at $130.69.  The Nov 140 puts went from under $4 to a day high of $10.13 and closed at $9.91.  The Nov 135 puts went from $2.5, at the time we mentioned it, to a day high of $5.93 and closed at $5.4.  Both more than doubled in just a couple of hours.

We also pointed out weakness in gold miners early in the morning:
November 16, 2010 7:07 AM
gold miners
coming down, FCX/GOLD/NEM

FCX traded all the way down to $96.02 before bouncing up to close at $97.61.  GOLD and NEM finished down more than 2%.  LVS and WYNN also saw increased downward momentum.  LVS finished down 5.82% and WYNN lost 3.29%.

Few stocks escaped today's onslaught today.  CREE received an upgrade and traded up +2.36%.  MELI stayed in the green with a +1.18% gain.  JCG bucked the trend, adding +4.19%.  However, most sectors closed down:

XME (metals and mining) fell 3.37% while GDX (gold miners) lost 3.04%.  XLE (energy) was down 1.87%.  XLF (financials) dropped 1.67% (below the $15 level).  Techs were all pretty weak and SOXX (semiconductors), INX2 (internet), and SWH (software) all retreated.  FXI (Chinese ADRs) slumped 2.88%.

The Dow ended the day down 178.47 points; SPX fell 19.41 points; Nasdaq tumbled 43.98 points:
SPX

SPX fell 19.41 points to close at 1178.34.  It closed below its daily MAs.  Its MACD curved lower.

Nasdaq

Nasdaq tumbled 43.98 points to close at 2469.84.  It close closed below its daily MAs.  The MACD sank.

Major market indices all closed under their respective daily MAs.  VIX popped up to test 23 and closed at 22.58.  As we have discussed for a month now, gold continues to be a very good indicator whether money is staying in the markets.  Last week, we started to see some light profit-taking on Tuesday.  But, the market hung on even after CSCO's bad earnings.  It was not until Thursday after the market, when gold fell overnight, did we see the market break down on Friday.  Today, in the Trading Room, I alerted our members to keep an eye on GLD's support at $130:

November 16, 2010 8:35 AM
GLD
approaching $130, at which point, we should start thinking about looking at some longs...

We cashed out most of our downside plays just before GLD hit $130.  After hitting $130, GLD soon started to bounce; at which point, the market started to bounce as well.  GLD traded a day low of $129.83 and closed at $130.97.

At the time of this writing, Asian markets were still mostly very weak.  However, I think we could see some bounces in the US markets tomorrow.  Again, there's really no hurry to get on the long side right now.  The momentum has shift to the downside.  Bounces may just invite more sellers to come in.  We'll keep our eyes on the financials and gold for pointers.  There are still a lot of high-flyers that have only retreated slightly, partially because fund managers that have missed the September rally are trying to include them in their portfolios.  But, if the market breaks the support and continues downward, not much can avoid the selling pressure.  SPX 1180 is a support.  The market closed just under.  If the market breaks down further, we could see SPX 1160 tested.

Good night and HappyTrading! ™ (click to see our Facebook Page)



Disclosure: no positions
Stocks: BIDU, NFLX, FSLR, GOOG, LVS, WYNN, FCX, CREE, MELI, JCG