Summer Doldrums Will End – Watch For Profit Taking and A Buyer’s Boycott

Posted 9:30 AM ET - The market is not providing us with many trading opportunities, but we nailed one Friday. I've been mentioning that Janet Yellen's comments in Jackson Hole would spark selling. We started shorting the futures and various stocks in the chat room Friday morning and we got a nice 13 point S&P reversal. I was not looking for a sustained move so we took profits. This is the last week of the summer doldrums. The market is in a very tight range and the SPY is right at $217.50 support. I would use this level as your guide. The jobs reports this week should be decent (200,000). Employment conditions have improved and credit markets are stable. Asset Managers are not going to chase stocks near an all-time high when seasonal weakness lies ahead. Hawkish statements from the Fed will spark profit-taking. I believe the bounce this morning will fade quickly. The bid will be tested. If stocks make a new low after two hours of trading we are likely to drift downward the entire day. If the bid holds we are likely to stay in a tight trading range all day. I have a large position in BZQ (bearish position) and that is a longer-term trade. Apart from that my overnight exposure is as small as it's been all year. I still consider this to be a low probability trading environment. Keep your size small and reduce your trading activity. Set passive targets and make your money early in the day. I will favor the downside early in the day. I'm not going to take any big risks and I will wait for the opening bounce to stall. Stocks with relative weakness that are rolling over at the high-end of their range will be on my watch list. . .

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