A Few Bright Spots To Watch Today
The market declined heavily for a second time this week. And the bears were able to drop SPX below 1225 support too. Additionally, and for only the fourth time in November, volume levels were average.
The high (average) volume was likely a result of the breach at 1225. Volume tends to increase if a resistance/support level is breached. What happens is traders defend 1225 (support), which creates volume. Then the bears continue to sell into that defense, which creates more volume. Finally, the bears pour on the sales and burst through the support zone and the bulls rush to shutdown the recently added new positions, which creates a lot of volume.
The bears need to be careful, if I'm right about what happened yesterday. In my example, the additional volume yesterday didn't necessarily come from strong hands driving the market lower. I think yesterday's additional volume actually came from a few bullish traders who rushed-in expecting 1225 to hold, then closed those positions once 1225 support was taken.
Conversely, if yesterday's average volume day was the result of strong selling pressure, not traders, the market would decline again today. The first target is 1197.
I will likely wait until around noon to make my decision. But it is likely I add longs to our portfolio today. Specifically, I would like to be able to trade into a stock that bucked the market yesterday and either moved higher, or started a valid bullish reversal pattern.
For example, Ladenburg Thalmann (AMEX: LTS) pushed higher yesterday and almost hit a new all time high. Shares began to form a bull flag too. And if they breakout, $2.55 is the target and $2.13 can be the stop. I own shares, which means TradeMaster Daily Stock Alerts will not add the stock to the portfolio.
Whether I add any new positions today or not, I will be working on the weekend video this afternoon. My goal is to have it completed at 3:00, so check the website around that time, or this weekend when you have more time to watch.
The bulls need to make a stand today. But buyers will not get any help from Asia where stocks were murdered last night. And while Europe trades with minimal losses, even the tiny decline will not be of much help to the bulls this morning.
Two bright spots: the euro has risen 1% overnight and oil is defending $100 and could rally today. The strong euro should help bolster the U.S. indices and the strong oil price should help the energy sector.
Despite the few positives, I favor a move lower. While I only expect a little decline, it could magnify. But if the bulls can work SPX above 1225 and hold it into this afternoon, I will likely add a long position ahead of Monday.
