Wave of Selling Continues – 200-Day MA Will Be Tested This AM

Posted 9:30 AM ET - Yesterday, the market got a decent round of economic news from China. The early gains vaporized quickly and the downside was tested. We did not get the bounce I was looking for and it needed to happen Wednesday. I took small losses on my call positions and my bias has turned more bearish. The ECB wants to ease and the Fed wants to hike. These opposing actions will create uncertainty. The US dollar will rally and that will hurt exports and earnings (currency conversion). In the absence of a bounce yesterday, we won't see any panic buying by Asset Managers. They will gauge the selling pressure and the bid will weaken. The 200-day moving average will be challenged right out of the gate. If that support fails quickly, we will test the 100-day moving average. There aren't any catalysts and downward momentum has been established. Retailers are starting to post results and they have been dismal. Mega-cap tech stocks have been fueling the rally and they are done posting. The news in the back half of earnings season will not impress. I view this as a low probability trading environment and that is why I'm keeping my size small. The losses this week are nothing that can't be fixed with one decent day of trading. Shorting the market in November rarely works out – keep it small. I will day trade from the short side today. If we close below the 200-day moving average, I will hold some puts overnight. If the market closes below the 100-day moving average, I will add. Good economic releases are what the market needs to move higher. The calendar is light so the selling will continue. Favor the downside and use the major moving averages as your guide. . .

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