Breadth continues to deteriorate into the election, as more stocks succumb to selling, relative to those being bought. The result is obvious in the McClellan Summation Index for both the Nasdaq and NYSE.
The Nasdaq Summation Index (NASI) continues its descent unabated, though recently it changed its amplitude with a little wiggle. NAMO dropped sharply yesterday. That isn’t a welcome sight for bulls.
We are seizing the opportunity to unload more of our long positions into these early morning advances. We can always get back in, once the clouds dissipate.
The NYSE McClellan Oscillator (NYMO) has started trending lower again. As a result, the Summation Index has turned lower, after a brief attempt to form a bullish cross earlier in the week. Lower Panel.
Futures point to a gap up. Wednesday price action filled a morning gap to the downside. Back and forth we go, on low volume, as the few players that remain whip prices back and forth. A bullish breakout of this pattern would likely be met with resistance at the 2150 ~ 2160 level.
This is where large blocks lie in wait. SPY confirmed resistance in this area early in the week, with blocks above 215.00. We’ve seen the upper and lower bounds of this small pattern inside the larger consolidation zone above 211.24 play out for the past 12 trading days. A push to the upper zone of this ascending channel, would yield another retest of the flat 50ma at 215.29. VBP resistance in the interim, is building above these levels. RSI, STO and MACD yield little intelligence as momentum is waning in both directions.
Our takeaway remains the same. Sell long positions into strength and wait for the result of the election. We have few positions left. Some of those remaining stocks are slightly under water. For these candidates, we decided to sell covered calls to reduce our cost basis. Others like SE< JWN, KSS are flat, while GPS is marginally higher. We’ll be out of these positions over the course of 2 – 5 days.
We are 100% cash in our 401(k).
It’s cold and rainy in North Jersey this morning, so make the best of your day.
Happy Trading – Vinny
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