Overnight futures were higher coming into the open as hopes over MORE QE spread like wild fire. Existing home sales dropped more than expected leading to questions over the stability of the housing market. Just before noon time Hillary Clinton’s tweet over price gouging occurring amongst Biotech firms sent the group lower along with the NASDAQ. By 1 o’clock buyers were able to stabilize the NASDAQ and push the index just under the mid-point of the session. Volume ran lower on the session, but it comes as no surprise as Friday’s volume was elevated due to option expiry. Aside from the attack on Biotech stocks the market did its best to recover majority of Friday’s losses. A good start to the week for bulls, but there are still warning signs.
Tomorrow we will see an unveiling her plan to reduce drug costs. No real surprise here a presidential candidate going on the prowl to whip up a rallying cry. Drug costs are unreal and the US does pay the most for pharmaceuticals. Almost seems like a layup. Biotechs were hit hard as algos began fighting themselves to see who can hit biotechs the hardest. In the end, all we need to know is the price action of these stocks. If we get an exit signals we are getting out. No questions asked. It is our system and we are not going to fight a system that has provided us with plenty of gains.
The inability for the markets to close near the highs is something to be concerned with regarding this current market environment. We are in a weak period seasonality and cycle theory is now pointing down. It would not surprise us if we do end up re-test the August lows. At the very least we should at least retrace majority of the climb from August lows. It is unlikely we will see this market make any headway until sometime in October. At any moment this may change, but the way it appears now this market has more downside left before we are able to push higher.
Two leading stocks we are keeping a close eye on AMZN and FB. Both stocks are hanging tough at the moment, but if they end up turning lower there is no great warning sign. UA and TSLA are two others to keep an eye on. TSLA did not have a great day, but remains above its 50 day moving average. Leading stocks are always a good signal for market health. Pay attention.
From a day trading perspective WGBS had a nice day. Platinum subscribers are able to gain access to our chat room where we do point out stocks worth watching intraday. Get 30% off our subscription prices by using coupon code: CRASH. Do not hesitate as the deal won’t last long.
Not the best way to start the week and we will be keeping a close eye on our price signals.
