The S&P 500 Index ended its best August performance since 1986 with a market message.
And it is well worth paying attention to as soon as tomorrow, and well into September.
Fortunately for me (and you), a lot of pieces of today’s stock market came together from what I discussed over the past week in my daily market commentary.
The timing is perfect. I can pull it all together right now, and then Mish will be back to writing this commentary tomorrow with a clean slate and a new month.
Here’s what happened…
The S&P 500’s 5-day up/down volume turned lower as illustrated in the chart below.
This is not a long-term negative, but it is a reason to at least expect a pause in the SPY, and as you can see from the other measures in this chart, this is not a very overbought level.
Important Note: the NASDAQ equivalent does NOT have the same pattern.
In addition, the S&P 500 ETF (SPY), Russell 2000 ETF (IWM) and Dow Jones Industrial Average ETF (DIA) all closed down on a Monday. Oops.
As I explained yesterday, since the March lows, stocks have closed up on Mondays 70 to over 80% of the time depending on the index, so when they don’t, something may be ‘different’.
And worse, they closed under their prior day’s low.
This pattern is particularly noteworthy when it’s a ‘first’ in some time as it is now.
As a result, it will be important to look for a 30-minute Opening Range breakdown tomorrow to confirm the beginning of a down move.
If you’re looking for a trade in all this, here’s one…
The Volatility Index ETF (VXX) continues to be strong regardless of the SPY’s strength. The two can not trend the same way for too long.
Therefore, if the SPY falls, the VXX looks ready to explode higher. And if SPY continues higher, the Volatility appears to be nervous enough to hold firm.
It sounds like a good time to be long stock market volatility and VXX rather than short the S&P 500.
I’ll be looking for a VXX OR breakout, and even if you’re not going to trade it, VXX trending higher will likely point to a muted potential for the SPY.
However, all the news is not bearish.
The markets rotated…
The Semiconductors ETF (SMH) lagged as feared, the Retail ETF (XRT) broke down as feared, and the Transportation Sector (IYT) reversed at its key breakout level, but…
The Biotech ETF (IBB) finally broke out of its consolidation to the upside!
Apple (AAPL) and Tesla (TSLA) both broke out of their Opening Ranges (OR) to the upside and ran helping the QQQ still close up over 1%.
Note: PDL = Prior day low, PDH = Prior day high
S&P 500 (SPY): Traded from its HOD to LOD in the last 10 min. making the daily chart look worse than intra-day action suggested. Consolidation day. 340 then 335 are important support.
Russell 2000 (IWM): Closed under 10 DMA and PDL. Needs to close over 157.50 to look good. Support at 155 area, then swing low is 153.60
Dow Jones Industrial Average (DIA): Closed under PDL. Resistance at 290. Support at 280.
Nasdaq (QQQ): New high. Support at 292.50 area then 285 is 10 DMA
TLT (iShares 20+ Year Treasuries): 163.30 is strong resistance. Support at 158.50 then the 200 DMA at 155.80.
Twitter: @marketminute
The author may have a position in the mentioned securities at the time of publication. Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.
