This is an opportunity for the market to stall for a day or two at the prior peak. We got a little bit of that today.
When we look at the intraday chart on the 5 minute scale, we see a market trading essentially sideways, which doesn’t look bearish at all. So, we should expect a little more of this as part of the short term stall, but another push higher should be expected.
Stock Short Sales at 2-Year Low, Data Explorers Says
Investors are exiting bearish bets on global equities, pushing bullish wagers on stocks to a two- year high versus short sales, according to Data Explorers.
The firm’s long-short ratio has risen to 9.5, having surged from 5.75 in September 2008 when Lehman Brothers Holdings Inc.’s collapse intensified the financial crisis, the London- and New York-based securities-research company said. The reading is the highest of the data that goes as far back as July 2008.
As we head into a potential right shoulder the collective long-short ratio is at a two year high. I’ll take that as a bearish sign for the markets and a little confirmation the right shoulder is viable for now. There’s virtually no shorts to squeeze, so the market must move higher on pure bullish buying activity if it’s going to continue past the potential right shoulder. That's going to require individuals to sell safe haven assets like bonds and gold and move into the stock market. Could happen, but I'll believe it when I see it.
$VIX: Hits the bottom trend line of a potential wedge, which is also a key support line going back many months. All waves in the wedge look like ABC patterns. Maybe a little splash below. We need to watch this closely for a potential change.
IBM: The move up is beginning to look labored and tired. See the volume. Price structure doesn't look that hot either.
JNK: I’ve said it before, “As goes JNK so will the market”. Why? If the market participants are overall bullish on the economy and company prospects, than it makes perfect sense to buy junk bonds. The opposite is also true.
$GOLD: The gold market declines today by almost 2%. We've dropped below the 1st and 2nd up trend lines. The next key support area is price support in blue which is also the 200 day MA. If we get below that, we have a more bearish view on gold.
Watch List: Back on the watch list is bearish views of CDE, NEM, and GLL. Also back on the watch list as short candidates are BRCM and CTSH.
NEM: The stock broke down today out of a little flag. Ironically it closed right at price support, the up trend line, and the bottom Bollinger Band. Next couple days should be key. RSI supports lower pricing. However, big volume down days (like today) on this stock occur at or near short term bottoms.
CDE: Still looks like a head and shoulders pattern. A little more down side is required. Waiting to see it happen to enter a position.
GLL: This thing is cracking me up. It finally broke higher, but the price structure leading into today’s move was challenging for me. Maybe it's a little 1 and a 2, and a 1 and a 2.
BRCM: The stock rolled over pretty hard today. Almost enough to damage the chart on price structure. We have another set of new divergences building. MACD about to turn over.
CTSH: Same as BRCM. Look at the price structure the past few weeks, that looks labored and not very impulsive.
KO, T, and VZ: All testing price resistance with RSI at overbought levels.
FDX and ONXX: Both failed to create an inside day and both failed to muster any real follow through.
Earnings Watch: The following stocks report earnings tomorrow.
ConocoPhillips COP $1.56 08:30 Est. am ET
Newmont Mining Corporation NEM $0.84 Est. Before Market Open
Lam Research LRCX $0.97 Est. Time Not Supplied
Visa Inc. V $0.93 Est. After Market Close. Chart below. So far, the pattern does not look bullish, it needs to move soon if it's bullish because it looks a little bearish.
From My Trading Desk: We opened a half short position on NEM today, see chart above. Today we closed our position on QCOM. I got a little impatient, but a gain is a gain and that’s 4 in a row on some very easy Big Cap (KO, WMT, UPS, and QCOM) trades. Now I have less money committed to the market heading into the potential right shoulder.
VSEC: We still own a third of a position. Earnings in a couple days. The stock opened lower but not much damage. We are a tad early ahead of earnings. A very thinly traded stock, so the move in either direction post earnings could be big. Pins and needles! Obviously, I want to see it above the down trend line just like KO.
Speculative Trades: LPTH and NANX, nothing new to report.
Final Thoughts: If I trade tomorrow, I'm probably looking longside at ONXX or VSEC. ONXX if it's down I will turn to the intraday chart for structure. VSEC above trend line on good volume. Outside of that, maybe short CDE if it falls. I'd prefer to keep it light though. A lot of traders on the Street are keeping it light waiting to see what the market does with the potential right shoulder.
Happy Trading.
J.D. Rosendahl, Rosey