What a week!
This was an epic week and a slaughter on Wall Street. From the highs to the lows of the week, the S&P 500 dropped 10.75%. Volume today (Friday) was enormous. The SPY did 650 million shares. This is even bigger than yesterday. It is hard to remember a Friday in August when this happened before. The panic this week was very much like 2008, just before Lehman collapsed. It is scary to think of what will come down the pipe later this year and early next. While they will try and patch things up in Europe, ultimately, there are too many holes in the pot. Anything they do will only be a short term fix.
It was not the greatest of weeks for me as a swing trader. To have so many winners all year and then a week of a few losers is never something I enjoy and frankly it is somewhat embarrassing. Yes, I know the market collapsed but I still expect better from myself. I had three stop outs this week. AKS, SSO and BAC. I am thankful I only had 25% of my total swing trade portfolio exposed (including MMM) to the market on this flush. After such a great year, a little bit of a humbling experience and a reality check. Even experience traders get slapped on the hand when the markets crash. This weekend will be spent studying the charts and getting levels ready on new trades. As I wrote in a post today, never let emotion cloud your trading. If the level is there, trade it. Today that happened with the SPY when it flushed through $118.00. While trading slightly lighter (half position), I picked up AKS at $8.80. That is now in the money nicely with a break even stop. Note how as a swing trader you have to get right back on the horse. Do not get gun shy. Rare crash type scenarios will happen every few years (in this market these days). If three stop-outs is the worst that happens, consider yourself lucky!
The markets flushed early, recovered to turn strongly positive and end the day around the flat line. The Dow was up 61, S&P 500 slightly negative, down 0.69 and the Nasdaq continued its rough patch with a drop of 24 points. Let me be clear, today did not end as a bottoming tail. After lunch there was one, but late day weakness changed that. It is still a very solid tail though and could signal a bounce coming. The reason for the strength was due to the ECB (European Central Bank) saying they would buy Italian bonds if Italy makes urgent cuts to get their debt in line. This is new territory for the ECB who has notoriously stayed on the side lines. More bailouts!
I continue to hold MMM which had a solid day, up 0.52 to $82.75. The stop on this is a close below yesterdays low of $82.11. The targets remain the same from the original alert.
AKS is extremely oversold, but then again what isn't. At this stage, it has a break even stop. First target is for $9.75.
OXGN I continue to hold. In these market conditions, one must give a little more room to all small caps when holding them. When the market stabilizes, this will be a rocket ship.
At this stage, that is all I am holding. I will be looking actively for more half positions early next week in this wild market. Keep in mind, we hit the $118.00 level but did not hit the $115.00 head and shoulders completion yet. That $115.00 level is also a .618 fib retrace from the lows of 2010 to the highs of 2011.
Over the weekend I will start posting large cap charts with target levels to watch for an entry. This market will not collapse too much lower before a big bounce. If the markets show weakness early in the week, I want to pick up a minimum of two more half position longs at appropriate levels, more if we head a little lower. Again, the reason for half positions is because of the market volatility. While during a normal day months ago, the market might have jumped up or down 1%, these days it is now 3%. Therefore, to swing trade it accurately I must buy half the position, but make my stop larger and your target larger to take into account the wild swings.
One last thing I thought was interesting today. The SPY rallied to close back above the key white trend line level on the chart below. This level was the gap window from back in late November. This might signal short term support. We will find out Monday.
Sunday night we will do a *No Hype Live* Broadcast. The futures will be going nuts, no doubt. Be there or watch it in the archives. We should have more information from Europe by Monday on what the ECB will do. This will be key in whether or not the markets tumble again. Hang on to your hats and subtract the emotion. Let's bang out some big profits next week!
Chief Market Strategist