The possibility of a US debt default still weighs heavily on the market. Today we saw a small oversold bounce in the morning, which was met with selling in the afternoon for the SPY to close on its lows. SPY is trading below the 100 and 50 day moving averages today. For now, it is time to stay light and in a wait-and-see mode as things are uncertain regarding the debt ceiling situation. $129.63 is the next point of reference. Look to market leaders to buy potential dips, but don't start too early. Tail risk is high right now.
Above is a short term picture of SPY, so when we hit oversold readings like we saw this morning, the active trader can take advantage of cash flow trades. As for the swing trader, wait for more data and precise levels. Some market technicians are looking at this macro Head and Shoulders pattern that could be developing in the SPY. This pattern is triggered with a break of the neckline that stands at $128/$128.50. If this pattern triggers, the target is $120-$117, which corresponds with a big support area from last November. It is hard to be short going into the weekend with the headline risk that is out there.
Today we saw a small bounce for the active trader but for the swing trader, wait for more clarity. There will be an opportunity to buy back market leaders once this market settles, and BIDU is certainly one of the market leaders after a strong earnings report. This is a stock to buy a dip, but wait for key support levels. First zone to test a buy back is a retest of prior highs: $156.06-$152.90, which is the 10 day moving average. If that zone doesn't hold, look to bigger support level of $147/$147.50. BIDU is trading far off its moving averages, it would be healthy to see some digestion in this stock before working its way higher.
AAPL is another go-to stock for strength after a blockbuster earnings report this quarter. AAPL is extended well off its moving averages. First spot to test a buy back is $383.90, which is the low from its earnings gap and coincides with the 10 day moving average. The next level to test a buy back is $366-$364.90, a retest of prior highs.
It was noted earlier this week that the OIH's were coming into the resistance area that was highlighted from the previous buy entries, which was a good spot to lighten up on the trade. $155-154 is the first area to test a buy back. $150 is the next key area to hold in the OIH's, which is support of the 50 day moving average. Remember to buy dips in the market leaders when the market is in correction mode.
Sometimes in the market, there are times to be in cash, and now is one of those times.
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