Aug 21 Steep Selloff Market Update and Stock Scan
Aug 21, 2015: 1:54 PM CST
The Steep Stock Market Retracement continues with a breakdown under yet another support level (2,045) into a second impulsive trend-day type environment sell-off.
What levels are we focusing on now amid this large trend day? Let’s chart them:
Also, compare that with the real-time expected sell-off we’re seeing in today’s morning update: Weekly Chart Perspective of the Steep Stock Sell-Off
The 2,045 target only held price for a few hours yesterday, and the end-of-day breakdown set in motion today’s gap and downtrend continuation environment.
Price shattered the 2,000 index target, rallying initially higher – on positive divergences – at the 1,990 level.
It’s this level that we’ll once again focus on today – balancing the odds of a “bounce” rally (if above 2,000) or a continuation of this sell-off into a collapse environment (if under 1,990 and 1,980).
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Weekly Chart Perspective on the Steep Stock Market Selloff
Aug 21, 2015: 12:09 PM CST
Given the negative divergences in momentum, volume, breadth, and market internals – along with the “arc” trendline distribution pattern – stocks had extremely high odds of breaking lower into a steep retracement.
At the moment, that’s precisely what they’ve done this week, right on schedule (or perhaps a little overdue).
Let’s update our Weekly Perspective charts of the Dow Jones, S&P 500, and NASDAQ to note what’s happened, what preceded it, and more importantly what do we do now.
We’ll start as usual with the S&P 500 Weekly Chart:
Under the stimulus of QE3, stocks rallied in a stable, persistent uptrend from 2013 into late 2014.
From 2015 to this week, stocks traded in a sideways distribution or “arc” pattern complete with lengthy negative divergences in momentum, volume, and Breadth.
Be sure to view the “What Breadth is Saying about the Current Market ” chart I’ve been promoting – and its correct message.
Here’s a specific planning chart from last night’s “Idealized Trades” Member Strategy Report:
The quote in blue is from Wednesday’s report, while the quote below is from Thursday’s report:
“At the moment, that appears to be exactly what’s happening.
Price was in DISTRIBUTION mode with DECLINING (deteriorating/diverging) Breadth and Market Internals and – as I noted – virtually every chart-based metric argued for lower prices.
As long as price remains under – and moving down away from – the 2,045 target level (achieved), then we’ll expect a continued “larger” retracement toward 2,000 or even 1,980.”
Note the “Rounded Arc” Arrow that pointed straight toward 2,000 – exactly where we are right now.
This big sell-off should not be a surprise.
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For now, we’re focusing on the 2,000 “Round Number” Reference Target (achieved) and marking it as our short-term pivot.
Beneath lies 1,180 if sellers continue to push this market lower in ongoing distribution.
The Dow Jones Index is weaker than the S&P 500. Continue Reading…
Downtrending Collapse Market Update and Daily Stock Scan
Aug 20, 2015: 3:05 PM CST
Stocks continued the bearish action, breaking away from the midpoint level of 2,100 toward the 2,045 target.
What levels are we focusing on now amid this large trend day? Let’s see!
We have an update THIS Monday of more of the same: “Yes, We’re STILL In the Trading Range. ”
The S&P 500 is testing the lower bound of the final shelf of support – it’s hanging at the “Edge of
Here’s a hint – it’s bearish (putting today’s strong sell-session in context of the broader picture of deterioration)
At this point, we need to focus on the 2,045 (and now 2,040) level for either another miraculous bullish recovery and intervention to boost price once again off support… or the “this time it’s different” which would continue this retracement lower toward 2,000 or 1,980.
Extreme Reward but High Risk for Leveraged Inverse Crude Oil DWTI and DTO
Aug 19, 2015: 11:32 AM CST
How would you like to buy a stock – or ETF – that tripled in value in less than two months?
Sounds impossible? It’s not – that’s exactly what triple leveraged inverse fund DWTI did recently.
Shares of the ETN tripled from the $60.00 per share level to the breakout high above $180.00 today.
Let’s take a look at this monumental movement but also highlight the huge risk inherent in any double or triple ETF.
Here’s DWTI, the Triple Inverse (3x Short) Crude Oil ETN:
If oil moves up 1% in a day, the DWTI ETN (ETF) is calculated and balanced to return as close to -3% as possible.
And if oil moves down 1% in a day, the ETN “should” return close to a 3% price gain.
Because commodity prices tend to trend or move in one direction for a sustained period of time, this can quickly add up for those holding positions.
The reward can be large, as seen from December into January with a powerful movement up from $50.00 to $200 (quadrupling in two months) or the March 2015 movement from $100 to $180 in about two weeks.
That’s an extreme, powerful, and potentially large return for those who bought this fund into the downswing in the price of Crude Oil.
Of course, in the real world, you’re not going to buy the bottom and sell the high.
There’s another hidden reality to this golden profit machine and it’s the immense drop or collapse in price during even a modest (small) rally in the price of Crude Oil.
The lower chart plots $WTIC – Crude Oil itself – with two yellow highlighted periods.
At the time when Crude Oil “only” moved up from the $45.00 level toward $50.00 per barrel, the price DWTI collapsed from $200 to $100, losing half its value in one week.
With great reward comes immense risk. Continue Reading…
Weak Stock WalMart WMT Breaks to New Lows in Downtrend
Aug 19, 2015: 10:23 AM CST
Wal-Mart (WMT) continues to appear on our stock scans as a “Weak Stock Getting Weaker,” and shares gapped and broke to a new swing low in an ongoing downtrend.
Let’s update our chart and note the breakdown – and where price could be headed:
First, compare Wal-Mart’s ongoing downtrend and “Weak Getting Weaker” status with that of Home Depot (HD) which I charted yesterday as a “Strong Stock Getting Stronger” with its own breakout to a new 52-week high.
I’m underscoring for you the importance of a trend and why it’s superior to trade WITH an ongoing trend as opposed to against it with reversal or ‘fade’ trades (fighting a trend).
Beyond that, review June 3rd’s “Charting Three Weak Stocks in the Dow Right Now ” update.
Main idea: Stocks in a downtrend – weak stocks – tend to get weaker, NOT stronger.
We see three specific support breakdowns in Wal-Mart stock highlighted above.
Note the little support shelves – with positive momentum divergences – and the resulting breakdown as the strong downtrend continued for shares.
We’re seeing not just another breakdown, but a gap scenario (strong impulse) on surging volume.
Odds favor a continuation lower in this “Weak Stock Getting Weaker” component of the Dow Jones Index.
Here’s the Weekly Chart for level planning and targeting. Continue Reading…