Futures are volatile this morning as markets decide on a direction. What may seem like the low at the opening bell, could be anything but, so caution is warranted. Profit taking will most likely dissipate in the morning session, so we will reassess as the day progresses. We will not take unnecessary risks, until we can assess the situation. Unfortunately, that means we have to wait.
Below is the weekly chart, showing price is still below the 20ema. High and low of the latest candle are barometers that will likely be tested in both directions.
Short term direction is anyone’s guess, so don’t expect our crystal ball to have the answer this morning.
I would recommend printing out a copy of SPY, NDX and IWM. Consider horizontal support zones and draw lines of support at key levels. To state the obvious, look for lower highs if your are bearish and a break of recent highs to confirm a bullish thesis. Price is below the 9/20ema, therefore we are bearish.
Considering all that has transpired in the past 24 hours, market internals should be your primary focus. Many indices, sectors and industry groups will be at extremes, therefore buying with a bias without first looking at TICK could be disastrous to your health. Since TICK is the heartbeat of institutional sentiment, we will lean on this indicator a lot over the next several days. TICK will tell you in “real time” what institutions are doing and thinking.
VIX will spike this morning. A fade from the High of the Day would be a short term signal, though we could see extremes like Brexit. The latter binary event is pretty similar in our minds. Shock and denial, followed by resolution.
Biotech is recovering markedly, as will related healthcare industry groups, now that the incumbent candidate “effect” is removed from investors list of caveats. XBI, IBB, LABU and XLV are in focus.
We will take profits on 1/2 of our bearish swing positions at the open. We will entertain holding the rest. We anticipate the markets will fail to erase the overnight losses today. That is the confirmation we are looking for this morning. A tepid response by the bulls will likely signal lower prices in the short term.
Once again, we have to see it first, before we can react with any certainty. 401(k) positions will be considered only after we have enough information to make an informed decision. Opinions don’t matter.
Happy Wednesday. It’s finally over!
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