U.S. Stocks Drop for Second Week on Signs Corporate-Profit Growth to Slow
U.S. stocks fell for a second straight week as a jump in jobless claims and an unexpected slump in Philadelphia-area manufacturing suggested a rebound in corporate profit growth won’t be sustained.
3M Co., United Technologies Corp. and Chevron Corp. lost at least 3 percent to lead the Dow Jones Industrial Average to a one-month low. Sears Holdings Corp. sank 7.5 percent as sales trailed analysts’ estimates. Benchmark indexes erased three days of gains on Aug. 19 as initial jobless claims rose to the highest since November and the Federal Reserve Bank of Philadelphia’s factory gauge dropped to the lowest in a year.
$SPX 15 Minute: A little divergence has formed on the 15 minute chart.
$SPX 60 Minute: The market has found a little support with divergences forming on the 60 minute, natural place for a little bounce. Maybe a fall to the second support line then bounce.
$SPX Daily: The market continues to test the 50% retracement level. It probed below it Friday but closed just above it. Given the intraday divergences, a little bounce is expected. I'm thinking a couple days next week. If it's still a trending move lower it won't last long, but price structure is far more important. Bollinger Bands are widening, but I would like to see price pierce the bottom band with price outside the band to support the bearish view. The question is will the RSI and MACD continue sliding lower with price later next week?
IBM: RSI trying to roll over with MACD sliding lower. Price closed below the 50 day MA. It's in No Man's land. I view a firm close below the 200 day MA as bearish for Mr. Market.
$VIX: The index tested the upper wedge line but failed on Friday. If the market is ready for a little bounce, then the $VIX should consolidate inside the wedge lines. Above the wedge line and the bearish view for the market gains momentum.
JNK: Still grinding above the down trend line. Price structure suggests a little more upside.
$COMPQ and XLF: Both are in the same position. Price is right at the right shoulder zone. The XLF has moved lower pushing on the bottom Bollinger Band.
GOOG: The stock is pressing the lower Bollinger Band with price below it for the past two days. It looks bearish. A little more down side below price resistance adds to the bearish view. It's an indication the market is avoiding risk if it continues lower.
My Watch List:
SRS: A little H&S but no break out yet. It's right below cluster resistance of the neckline, upper Bollinger Band and the 50 day MA. Above all of that is bullish.
VXX: It stalled Friday. Still needs to rally above cluster resistance directly above, probably a better trade with the $VIX above it's upper wedge line.
SDS: Moved up early Friday but gave most of it back and traded back to the neckline. It also tried to push the upper Bollinger Band higher. Next few days should be interesting as it sits on the neckline, something needs to give.
QID: A little H&S pattern in play. Above the neckline and 200 day MA adds to the bullishness of this trade.
FAZ: Made the big move early Friday testing the upper Bollinger Band and the 200 day MA, but gave most of it back. Above the 200 day MA and the prior price peak is more bullish for this 3-1 ETF.
EUO: Double short the Euro? We've seen this structure before on KO. Price jumps over the down trend line. MACD and RSI have plenty of room to support higher prices.
UUP: US dollar in a similar mode. Moving higher above the down trend line and the MACD and RSI support higher price.
UNP: We have the same structure we've had the past few days. Price needs to maintain below the right shoulder to retain it's bearish view. Bollinger Bands are pinching, so we should expect a move soon.
UTX: Price has pierced the lower Bollinger Band. Looks bearish with the RSI and MACD heading lower.
V: Wedge pattern in play. I've labeled it with the more bullish view where the wedge is b of B. It could be any number of different structures though. It also might roll over and continue to sell off. Tough call. A little more price and Bollinger Band data should help.
From My Trading Desk: Friday we made a couple of trades. We shorted another half position on UNP and closed it mid day. We also bought a 50% position on VXX, but decided to get out mid day as well. We had a nice gain on UNP and a very tiny gain on VXX. The reason for exiting both trades was the divergences forming on both the 15 and 60 minute time frames on the market. So we made some money and tested VXX.
Next Week's Trading Game Plan: As long as we stay above the market's mid July low, I want to stay nimble and light, especially with intraday divergences brewing. If I trade based on Friday's price, I'm leaning towards UTX because price has dropped below the lower Bollinger Band. I also like the way EUO is shaping up, it could easily continue higher and push the upper Bollinger Bands.
Happy Trading.
J.D. Rosendahl, Rosey