Despite the Shanghai closing down by more than 5% US Stock futures began the day in positive territory. Unfortunately, the party did not last long as sellers regained control pushing stocks lower for much of the morning continuing into the early afternoon. While the market was selling off the VIX never really got going until the lows of the session for the S&P 500. Even at the lows sellers began to pound on the VIX trying to push stocks back into the green. The final hour of trading saw buyers coming in and pushing the indexes back into positive territory. Volume is not overwhelming suggesting a bottom is likely in. There remains a lot of damage to the market and it is going to take some time to repair the damage. It is better to have patience at this point in time rather than trying to bottom tick this market.
The last hour rally pushed this market to market day one of an attempted rally. All we really needed was a positive close, but given the day’s action it did not appear we’d get day one. Thanks to the Dow and S&P 500 as the NASDAQ could not close positive for the day. Volume was higher across the board, but there was no sense of capitulation from the market. The VIX never made a new high indicating the market saw any panic. However, given the close there is a good probability we could see a few day rally, but it won’t be anything sustainable. The lack of everything hinting at strength is the reason we won’t go very far. Where is the strength?
Earnings season unofficially kicks off tonight with Alcoa reporting. Who decided Alcoa would be the unofficial start is unknown and who really cares. Earnings are going to be interesting as we have seen the market pretty much crap itself recently. Can earnings surprise to the upside? The market still trades at a high premium and it will take some great numbers to change the market’s view. We are mostly in cash with less than a handful of positions left. Without any cushion heading into earnings we will have to be mindful of when potential triggers report. Until this market confirms a new rally and we see solid leadership new positions will be light. It is best to do no harm first and wait for odds to be in our favor.
We will stay quiet until the proper time to strike. In the meantime, we do have opportunities intraday. Today was a fun way to start the week.
