PM: Down one percent

S&P500 daily at end of day

PM Update

MARKET BEHAVIOR
The S&P500 ended down 1%, giving back Friday’s gains in average volume.  The market is still holding above minor support at 1620 and major support at 1600 and the 50dma.

MARKET SENTIMENT
While it felt dramatic, today’s dip did not do any major technical damage to the rebound.  Markets remain uncertain and that leads to volatility.  Yen and Nikki swings are putting the squeeze on major banks and hedge funds and that anxiety is rippling into our market.  It is unlikely turmoil in Japan will directly affect our economy, but it could influence where liquidity ends up.  Contrary to today’s move, instability over there can create renewed demand for US stocks and bonds as traders flee to our relative safety and stability.

TRADING OPPORTUNITIES
Expected Outcome:
Selling today is not a surprise.  The market is entering a consolidation phase following sizable gains and choppiness is part of that cathartic process.  Support and a bounce off 1620 on Wednesday is bullish.

Alternate Outcome:
Failing to hold 1620 and testing 1600 so soon after finding support is troubling and forces us to take a more defensive stance.

Trading Plan:
A bounce on Wednesday is buyable and a breakdown is a warning flag.  Stick to our stop-losses and don’t let recent profits turn into losses.  While the more adventurous can trade these swings, a more conservative trader can sit on recent profits and wait for a higher probability trade.  Making money in the markets is easy, the hard part is keeping it.  The best way to avoid giving back profits is to avoid forcing a trade where there is none.

AAPL daily at end of day

INDIVIDUAL STOCKS
AAPL‘s developer presentation on Monday failed to impress the market and the stock remains stuck at the 50dma.  Another catalyst came and went without reviving excitement in the company and its products.  Holding support this long is encouraging, but also sets the stage for an avalanche of stop-loss selling if we break through it.  Quick profits can be made here buying the breakout or shorting the breakdown.  Wait for the market to make its move and jump onboard with tight stop-losses.  But don’t hang on too long and take quick profits after a few days.  Since January AAPL’s been a trading stock and buying dips and selling strength is still the best way to play this name.

Plan your trade; trade your plan