Bears Continue Assault on Wall Street
We spent a ton of time doing chart work this weekend and basically worked all day Saturday and Sunday digging for clues on where the market could be headed over the near-term. We were in the matrix but we never mind doing the homework as it is fun to try and figure out where the indexes could trade to and finding the right options to play on a possible move north or south in a stock or index.
What made Wayne Gretzy so great is that he always anticipated where the puck would be and skated to that area on the ice. Most hockey players follow the puck and skate after it. This is what the current market environment feels like but if there is a further decline we know the levels the bears will be targeting.
If you haven't logged into our Members Area, we remind our subscribers every Monday if they really want to learn the market then it is important to follow the charts each and every week. So do it now after you read the midday update. It will help keep your emotions in check and it will give you a great education.
The charts showed further weakness to start the week and with futures lower throughout the night, this is how the open played out and the test to support has been textbook.
The little wiggle room the bulls had is being tested and today's close will be super important. There were a ton of clues left from last week that we highlighted, especially the Dow's 3 Musketeers, and to watch them for a rebound or breakdown.
We gave a specific downside target on the Dow that could trigger the dominoes on the other indexes but the bears haven't reached it.
While the current action suggests loading up on put options, we have seen over the past 2 years where this strategy has crushed the suit-and-ties that have called for the mother of all selloffs over this time frame.
At some point the market pundits will be right and there is some money to be made going short select stocks but we just aren't ready to short the indexes - yet. The opportunity to do so could come as early as this afternoon but let's wait until we get the green light.
The Dow is down 109 points to 16,303 while the S&P 500 is sliding a 12-pack to 1,853. The Nasdaq is declining 31 points to 4,096 and the Russell 2000 is lower by 14 points to 1,139. The VIX is at 15.30, up 1.34.
In the meantime, there is one stock we have covered for years that we feel is about to fold like a cheap lawn chair. Shares are just south of $32 and this level should serve as resistance. We are looking for shares to make a plunge below $30 and the put options were are recommending should make 100% if we are right.