MARKET COMMENTARY

There was no reason for the severe market sell-off in Asian market on Friday. The Dow fell 500 points after market opened. In an oversold market, further drop may be limited. What we have experienced so far is unprecedented and considered an exception. Dealing with situation like this, we have to be extra careful.

More selling is possible as the way the Dow chart is telling us. The Dow is not in the oversold zone although the weekly says it is. I am not in favor of any further shorting (long of puts) at this time. In case you have taken some bearish position, you should consider closing the trades when the Dow’s RSI dips into the oversold zone; i.e. below the 30% line. Do note the falling volume which is a sign of cooling off. The breakout of support on Friday wasn’t enthusiastic enough to warrant meaningful extended selling in the next few days. The profit potential of further shorting can be limited.

The oil market continues to weaken. We are reaching a point where we may see bottom soon. If we look at the USO (United States Oil), we can see that the previous low prior to the infamous bullish run late last year till early this year is near.

DJIA Daily Chart

The Russell hit the lowest point so far and formed a Doji. It does look like a rebound in the market. Furthermore, we have a very clear RSI and price divergence. Stay off any short position. Watch the market development.

RUT Daily Chart

The Unites States Oil chart shows the support based on the last low prior to the Bull Run that surged to the peak of $147 on Crude futures. The support is seen at $45 on USO.

USO Weekly Chart

STOCKS TO WATCH:

NA

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MARKET COMMENTARY

The bearish wave swept through the market again, renewed its vigor that had subsided last week. I believe the momentum will grow as the CBOE volatility gauge is pointing up again. This is despite some decent earnings from a couple of companies yesterday. Although the market was bearish, it was pretty steady and less whipsawed than those days that swung between 800 to 1,000 points in one day. This is very conducive to the short sellers.

The Dow broke the triangle chart pattern, so had the S&P 500 (SPX). Now I am looking at the last straw which is the common support from the last low to break the market once more. Once break, we are on the new wave of the bearish trend. Based on the futures market data and the higher volume from yesterday, it may just happen as soon as the market opens. This is time to take some positions, my friends.

While the Crude Oil stays steady since it made a new low at 66.58, the gold price crashed again. The futures market has seen the price broke even the last major low. There seems to be no support for the gold at this time.

DJIA Daily Chart

The Russell broke the triangle pattern but stayed above the new support line. But I expect to see that break when the market opens. You may consider buying some put options on this index.

RUT Daily Chart

The Nasdaq was surprisingly more resilient than other indexes. Nevertheless, I guess it still may not hold the line. A break can occur very soon.

NDX Daily Chart

STOCKS TO WATCH:

NA

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MARKET COMMENTARY

The market continued to move in a more organized manner on Tuesday. This stability is reflected in the Volatility Index ($VIX) which showed only minor gain in a relatively strong falling market. The Dow had lost 231 points on Tuesday.

The Dow’s triangle pattern remains intact as of yesterday. I am still anxiously waiting for breakout to occur. At this juncture, it is still hard to tell which way it will break out to though there is a strong possibility of another bearish market on Wednesday. Anyway, do watch the 8,600 support for a breakout. When this happens, you can short the market (or long the put options).

Meanwhile, the Crude Oil price has dropped to the low of the pre-bullish run to the high of $147.27 per barrel. The OPEC is preparing to halt production when the member countries meet on next Monday. Looking at the momentum of the price movement, I think the Crude Oil will continue to fall for the next couple of days. A rebound should happen on Monday and the days after. We shall monitor this commodity as I see opportunity to take position to profit from this black gold.

Talking about gold, gold price too has dropped significantly. The talk about gold being a safe heaven for investors in the poor stock market condition has fizzled. I guess the chart is telling truth, not the market watchers. But do look out for a rebound soon. It looks like it is going to form a double bottom soon.

DJIA Daily Chart

Russell’s story is the same of the Dow. Watch for breakout if the market gets really bearish on Wednesday.

RUT Daily Chart

Although there is no triangle chart pattern formed in the Nasdaq chart, I feel that this index might break out sooner than other indexes. This might be a good choice for put options as early as the market opens.

NDX Daily Chart

STOCKS TO WATCH:

NA

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MARKET COMMENTARY

For the first time in three weeks, the market was very orderly and unsurprising. It surged 400 points in neat pattern. Certainly, the market became less fearful. This should serve as good news to the value investors. But, there is no guarantee the bear market is over. On the contrary, I think it still has room for further drop. But it should not be as panicky as before. This calm sentiment is reflected in the VIX index ($VIX) which fell 24% in one day. This can be the start of market stability.

Anyway, the Dow’s chart did not suggest further bullish momentum for Tuesday. There are two reasons. First, the triangle chart pattern is still valid. Triangle is a trend continuation pattern. Hence, the bearish trend is not over yet. As I said before, there should be one more crash (which can be regarded as aftershock) before the bleeding stops. Second, the volume shrank in soaring price. This is not a sign of support for the bullish move.

Nevertheless, I am still unsure how the market will react in the next few days. I think we shall wait for it to present itself on Tuesday before making decision. The breakout of the triangle is the tell-tale sign of next price actions for next few days.

DJIA Daily Chart

The Russell index rose in tandem with the Dow. Watch the support or resistance breakout for entry point.

RUT Daily Chart

No much difference to mention for Nasdaq. Do the same as to the Russell above.

NDX Daily Chart

STOCKS TO WATCH:

NA

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MARKET COMMENTARY

It seems normal for a trading day to wobble in a range of more than 400 points in the Dow, probably higher. What looked like a bearish day could become a bullish day and finally closed at the last minute to a bearish one again. This is the kind of market we are in now. To certain extent, the technical analysis, and even the fundamental, can hardly apply in this turbulent market. Even news is lacking its predictable impact on the direction of the market. Ironically, luck is probably the only thing you can rely on to make money.

But, betting on the bearish move or selling into the strength is probably a reliable tactic, but not sure for how long. Yes, I am rather worried to trade in this kind of market at the moment.

The Dow looked like directionless. As the price action consolidating in shrinking volume, it may be headed in a triangle pattern. This is a staging period. As the triangle is small, it should be a continuous pattern. That means more bearish move is forthcoming. Watch the direction of breakout for confirmation before betting on the market again.

If the Dow continues to plummet as expected, I believe the intensity of the fall is less. Volume should further reduce. When we reached a point of absolute low, we strong bullish rebound will occur and a bottom is found. This scenario will probably happen in a month time, give and take another 2 weeks. Let’s watch.

DJIA Daily Chart

The Russell will probably break out faster than the Dow as it has more volatility than the older index. The Russell, by the way, is more profitable to trade.

RUT Daily Chart

The Nasdaq’s is more difficult to read. It has fewer common patterns to tell a story. But I will watch the support closely. The only thing that suggests a bearish move on Monday is the shooting star that had occurred on Friday. But this is rather weak, though not impossible.

NDX Daily Chart

STOCKS TO WATCH:

NA

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