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This weekend, in my Market Forecast, I warned about the new "bearish formation" in XLF, the ETF for the financial sector. Right of the gate, the financials stumbled (STT -59.04%; PNC -41.4%; JPM -20.73%; WFC -23.82%; GS -18.96%), and SKF went sky-high (up +28.75% today)! Rest of the sectors followed the financial stocks lower. Techs were very weak, with biotechs hanging on. Gold jumped (also mentioned this weekend). Oil tried to fight the selling pressure in the morning, but succumbed to the downward draft in the afternoon.
We locked in profits on a couple of good trades today:
January 20, 2009
12:55 | HappyTrading GS ($59.80) Sold to Close GSNM Feb 65 put, at $11.00 +46%
10:31 | HappyTrading AEM ($52.40) Sold to Close AEMBJ Feb 50 calls, at $6.30 +13%
We got into AEM in the morning as the market dropped fast right at the open. The thinking was that since gold was going higher, AEM should benefit. Also, I did not want to chase puts after the big drop at the open. After lunch, the market started to form a new leg down, so I cashed out on the AEM calls to protect the profits. Of course, if the market was going lower, the financials will lead. So, I initiated the GS puts. In 3 hours, I was able to lock in a +46% gain on those puts. Those options closed at $10.85.
Bucking the trend was PCP, which jumped +5.4% higher on good earnings. After the market, IBM easily beat the estimates with on its quarterly report, in addition to giving a strong forecast. IBM shares rose +4% in AH trading.
The Dow was down 332.13 (closing at 7949.09, below 8000); SPX dropped 44.9 points; Nasdaq tumbled 88.47 points:
VIX jumped +22.86%. Most sectors were down. XLF (financials) fell 16.53%, below $9 (Nov 07 low). SOXX (semiconductors) was down 7.16%. Commodity-related sectors were also weak: OIH (oil services) -6.99%; XME (metals and mining) -7.62%; XLE (energy) -5.33%; USO (oil) -4.02%. FXI (Chinese ADRs) dropped 8.52%.
SPX
SPX fell 44.9 points to close at 805.22, just above the 800 level. The daily MAs are showing a new "bearish" formation. The MACD was lower.
Nasdaq
Nasdaq tumbled 88.47 points to close at 1440.86. Its daily MAs and MACD slid.
The market is looking really weak. SPX has already started a new bearish formation. Nasdaq's daily MAs have also begun to curve down. Financials just keep on sinking. VIX could easily test 60 from here, closing today at 56.65. Its intraday charts are topping out though. With IBM delivering an encouraging quarterly report, the market might see some eager buyers tomorrow morning. But, be very careful, as the market could test the Nov '07 lows before getting sustainable strength. We'll be updating the market actions in our Trading Room.
Good night and HappyTrading! ™
