Stock Market Carnage
One by one sectors are being destroyed. My favorite cyclical leading indicators: Dow Jones Transportation Index (DJT) and Philadelphia Semoconductor Index (SOX) were the hardest hit today. American Airlines (AMR) and Micron Technology (MU) were the culprits respectively. DJT is at new 2011 low. SOX has filled all gaps today (329 and 326) and is threatening new 2011 low by a point.
The overall market feels heavy here. It has a strong downside bias and gets sold on any rally. This is how bear market behaves. No wonder S&P 500 (SPX) is at new 2011 low as well, finally trading below 1100 on cash session.
Russell 2000 (RUT) is also at new 2011 low, not to be outdone.
Institute of Supply Management (ISM) Purchasing Managers' Index (PMI) report was above 50 today and even surprised above estimates. It did not matter, strong 20-point SPX rally got sold at Daily Pivot (DP). Rejection was unanimous in all stock indexes, as Dow Jones Industrials (DJI) and NASDAQ 100 (NDX) ran into their DP at that time. Pivots are among some of the strongest and most reliable indicators available. Study and use them, I suggest.
So we are below Weekly Support 1 (WS1) on S&P500 futures (ES_F) as I type. There is a 20-point pocket below, which will probably get filled sometime overnight or on cash session tomorrow. Should we be so lucky? I am looking for a bottom to develop at WS2 - roughly 1067-70 on ES_F, which will correspond to 1073-76 on SPX.
Be careful what you wish for. In my last week's post I mentioned Financial Select Sector Fund (XLF) to possibly have a short-term bottom and a rally to 13.48 at least. Well, a few days later as it was up 7.8% at 12.60 I said that maybe it is time to take some off the table. I did not think that we would have a straight fall to new lows after that remark. XLF is at new 2011 low today. Always trail your stops to break-even after you took profits on your partial position. Write this into your rule book and read it every day.Continued on the next page