Today, the US stock market followed the Asian markets down on a global pullback. Last night, in my Market Forecast, I pointed out that both SPX and Nasdaq are showing weakness and are ready for a quick drop. It happened today! The market dropped sharply right from the open. The Dow fell 200 points within and first 15 minutes from open. Then, the market basically traded flat for the rest of the day!
Techs were very weak: BIDU -5.31%, GOOG -3.28%, AAPL -4.31%, RIMM -2.78%. Commodities also fell hard, as the dollar traded higher. X stumbled 8.28%. FCX lost 6.74%, and RTP slipped 6.25%. Last Friday, in the Trading Room, when members asked me why not buy in on the pullback, I responded:
August 14, 2009 10:13 AM
why wouldn't you buy a pullback here?
because there's no need to act right now... SPX is below 10-day MA and could fall to 20-day MA, which is just below 990. VIX is trying hard to turn again. Until things are clearer, no need to "anticipate".
Sure enough, VIX did a huge jump today, and the market pulled back even more. We have been sitting on mostly cash for more than a week now and were fully prepared for today's drop. This also gives us the flexibility to trade on the downside today. The Dow finished down 186.06 points; SPX fell 24.36 points; Nasdaq tumbled 54.68 points:
Most sectors were in the red. XME (metals and mining) again led the market with a 6.33% loss. GDX (gold miners) fell 4.87%. USO (oil) and UNG (natural gas) both lost grounds. SLV (silver) and GLD (gold) were both down as well. SOXX (semiconductors) led the techs with an almost 3% drop. XLF (financials) slipped 4.21%. FXI (Chinese ADRs) stumbled 4.65%.
SPX
SPX lost 24.36 points to close at 979.73. It closed below the 20-day MA. The MACD went lower.
Nasdaq
Nasdaq tumbled 54.68 points to close at 1930.84. It closed just above the 30-day MA. The MACD curved lower.
With today's quick drop, both SPX and Nasdaq closed under their respective 20-day MAs. Nasdaq came down to test its 30-day MA. The big question after today's quick drop is, of course, "Whether this is a healthy pullback, or the start of a correction?" Well, so far, it is healthy! The 30-day MAs will present the next support levels. Below the 30-day MAs, I think as long as this pullback stays above SPX 950 and Nasdaq 1900, things will still stay healthy. But, although last Friday was also a down day, today was really the first day of a respectable pullback. So, there's no hurry jumping back on the long side just yet. I'd rather enjoy a couple of days playing the downside. However, SPX did try its best to hold 980. We'll see how the market deals with this level tomorrow.
Good night and HappyTrading! ™
