Heavy Selling in NASDAQ-100 Combined With 11:30 Sell Signal Pushes U.S. Equity Markets Down Sharply

U.S. Equity Markets

As I stated yesterday even though by definition we are not in a bear market it feels as though we are in one with the way stocks are trading across the board. Anytime the markets rally they are met with heavy selling. Shortly after the opening today the Dow Jones Industrial Average was up about 80 points. All of a sudden massive selling came into the NASDAQ-100. We saw heavy selling in AMZN, PCLN, GOOG, AAPL, FB, and NFLX. These are the names that carried the market up and it seemed like everyone wanted to get out at the same time. When the Dow Jones Industrial Average was up about 80 points I saw the Russell 2000 lagging. This was a clear warning sign as the Russell 2000 was not participating with the overall market. At 11:30 there was a reversal in the overall market as I got sell signals on the Dow Jones Industrial Average, S&P 500, NASDAQ-100, and Russell 2000. The Beige book was released at 2:00 showing that the Federal Reserve is expecting a robust economy and a continuation of growth. I do not see it and I do not know what they are looking at. The market did not respond well to this as it signaled potential future rate hikes.

I was looking for the S&P futures to get into the 1965-1985 range where I would look to get short. On Friday when the S&P futures closed below 1956 I got a sell signal on the weekly charts. The U.S. equity markets have gone straight down from there. I was looking for a bounce and today the S&P futures traded up to the 1943 level but it did not have the steam to push up into my range. The S&P futures had a monstrous move down off of those highs trading down as low as 1878.

There are still gaps below in the Dow Jones Industrial Average down to 15600 as well as gaps below in the S&P 500. The U.S. equity markets were extremely oversold and the S&P futures ran about 40-50 handles off of the low. Right now I am on the sidelines as anything could happen. I am still looking for a bounce where I would look to get short the U.S. equity markets; however the S&P futures are 50-60 handles away from the level at which I would be comfortable. I am waiting for clearer patterns to set up on the daily charts.

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Gold

I stated that I would be looking to buy gold in the 1065-1080 range using a 1055 stop. In the overnight session gold traded down to 1079.60. When gold pushed up above the 1085 level I tweeted out that I would look to exit any long positions in gold. Gold exploded upward when the market dropped and traded above the 1090 level. Gold does not have the greatest pattern but it is a tradable pattern. Gold is still negative on my weekly chart. If gold closes below 1070 I will get a sell signal on my daily chart. I caught gold a couple times on the long side and now I am on the sidelines until I see a clearer pattern develop.

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Crude Oil

Today crude oil traded above 31 dollars a barrel before the inventory number was released at 10:30. There was a small increase in crude oil inventories but there was a large increase in gasoline inventories for the second week in a row. This put heavy pressure on crude oil dropping 80-90 cents immediately. Crude oil bounced, trading above the 30.80 level before settling around the 30.50 level. An analyst came out today and said that they would not be surprised if crude oil got down to 10 dollars a barrel in the next year to year and a half. The low gasoline and heating oil prices are great for the consumer. It is mind boggling to me that the heating oil front month has been trading below 1 dollar. Crude oil is extremely oversold here. I would love to go back in and look to get long crude oil in the 28-30.50 range but I would rather wait for a bounce where I would look to get short crude oil.

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zThank you,

Stephen Kalayjian
@stevekalayjian

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