The market took the gap down in stride today, surging higher to fill the overnight gap before the SPY ended up closing down only 1%. Selling intensified at noon after some early strength, but buyers stepped in to rally the market into the close. Today's gap down was handled better compared to the action over the two last weeks, where selling generally led to more selling. Today's weakness was led by financials and energy with tech and industrials not far behind. Where will SPY go from here? We have had a solid bounce but are trading in the middle of the range, making it difficult to get conviction on the long side or the short side. Continue to monitor the action, take it slow, and we should get more clarity soon.
Below is an hourly chart of SPY, so the retracement levels are easy to see. Right now, the SPY is holding above the 25% retracement level from the bounce off lows. The 38% retracement level is $116.77 and the 50% retracement level is $115.50.
The trade in the precious metals was largely driven by economic news in both the US and abroad. GLD continues higher and closed on the highs today. Last week's pullback in GLD was just a move into the 10-day moving average. Everyone has an opinion on gold--either it's run is still just beginning or that it is very extended to the upside. If you stick strictly to technicals, GLD is showing tremendous strength as it flags at highs. For the active trader, look for a momentum scalp through highs for a trade, but do not look to get invested at these levels.
Gold miners are starting to act better with the sustained strength in GLD. They were highlighted this morning as a sector spotlight on the Morning Call. RGLD has a solid chart pattern and could trigger for a move soon. It has held above the previous breakout of $62/$63 and has an upper level consolidation forming. Look for a move on volume above $70 for new highs.
AAPL could use some more horizontal work before setting up for another swing trade, but the dips are buyable in this stock. AAPL closed down less than 1% today. Use this as a gauge for the market.
AMZN has been out of play for a few weeks now. Is AMZN consolidating for a move higher or setting up for a clean break of this ascending channel? It is trading below the 50-day moving average and trying to hold support of the 100-day moving average. Today AMZN closed the day down over 2%. We are not ready to commit to a direction for AMZN, but will be watching it closely.
BIDU closed the day down about 5% but closed off the lows. BIDU began selling off Monday after negative news was released, which coincided with a great short into resistance that was targeted in the Morning Call (8/15). After 2-days of selling, is BIDU coming into a buy area? With potentially damaging news filtering out, we are not yet ready to commit to a buying strategy, but this is another one to watch closely as volatility is likely to be high.
OIH closed the day down around 2.5%, showing relative weakness to the S&P's, which closed down 1%. Looking at retracement levels from the move down from $163 to the low of $122, OIH rallied into the 38% retracement level. It looks like there is more downside action to come for the oil sector.
Financials continue to be a drag on the market. A lot of financial stocks (MS, GS, BAC, C) are creating bear flags at much lower levels. On one hand, banks are very oversold, but based on the technicals this sector is poised to move much lower. The sector could be adjusting to a new paradigm, and several prominent investors are starting to pare down stakes in financials.
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