SPX Largest Drop Since Nov 16...FFIV Down 30 After Earnings...

The SPX had its largest one day point drop since Nov 16 closing down -13.10 at 1,281.92 on Wednesday. This follows the SPX reaching its short term breakout price target of 1,294 just yesterday. AAPL opened higher and closed lower -1.81 at 338.84 after reporting better than expected earnings after the close on Tuesday.

IBM after also reporting strong earnings after the close on Tuesday opened higher and closed higher, up +5.04 at 155.69 .  The strength of IBM, JNJ, MCD, PG and VZ helped the INDU pull back just -12.64 points.

After the close on Wednesday FFIV reported Q1 adjusted EPS of 88 cents vs. consensus of 83 cents, revenues of 268.9M vs. consensus of 270.34M and gave Q2 guidance of adjusted EPS of 84 – 86 cents vs. consensus 85 cents. Missed revenues and lackluster guidance sees FFIV down -30.29 or -21.83% at 108.49.

SPX bearish engulfing
INDU black spinning top, potential bearish harami
COMPQ bearish engulfing
RUT huge bearish engulfing confirms Tuesday’s hanging man, inside day

Breadth weakened on Wednesday as decliners led advancers 3.46 to 1 on the NYSE 4.62 to 1 on the NASDAQ…

Exchange     NYSE     NASDAQ
Advancers        676           480
Decliners       2,341        2,222

Index    Chg.    Close    Direction    Confirmation
VIX      +1.41      17.31     Up                Yes – SPX
SOX   -10.60    439.33    Down           Yes – COMPQ

Leading stocks > 1% on Wednesday included FAZ, UNG, CHL, HAS

Losing stocks < -1% included CREE, MOS, IPI, PCX, SINA, ARUN, CF, FAS, VECO, X, RVBD, LDK, ESI, MCP, GS, AKS, CRUS, A, F, BAC, NETL, VMW, CLF, POT, AGU, DECK, HLF, SWK, WLT, TIE, STI, SNDK, V, FCX, CAM, AIV, ATI, URE, UAL, NDAQ, CRM, DOW, PNC, GMCR, A,D, JEC, DLR, SKX, ZION, PCP, FWLT, NYX, ATW, LVS, HUM, FDX, CMG, WHR, LXK, MHS, TBT, HANS, DE, SMH, SPG, ICE, DISH, BA, HSY

Positives – Euro, IBM, relatively strong INDU

Negatives – SPX, VIX, NDX, SOX, TNX, AMZN, GOOG, PCLN, stronger bonds, sector weakness, Weaker advancers/decliners

Interest rates moved lower on Wednesday and bonds moved higher. The Euro rose 89 pips to 1.3474 at 5 pm ET.

All nine sectors fell on Wednesday with Materials XLB -2.31% and Financials XLF -2.23% the weakest sectors.

Dave’s Insight - Many stocks on Wednesday broke the low of the high day or confirmed bearish candle patterns which are bearish exit signals for many short term traders. This can also be an entry signal for short term bearish trades for some traders.

An equally important concept that I have taught for several years is exit a trade when it reaches its pattern target. On January 12 the SPX hit its 1,281 December breakout price target and yesterday when the SPX hit its January breakout target of 1,294 were both exit signals for breakout trades.  Also many stocks recently reached their pattern targets.

Take today's selloff seriously as the first day of a pull back of unknown magnitude and duration.  Do not rationalize on your exit rules, follow them.  Whether you would be in or out of a position, follow your rules.

Earnings
Wed:
EBAY - Q4 EPS 52 cents vs. 47 cents consensus, raise guidance
FFIV - Q1 EPS beats, revenues miss
GS - Q4 EPS 3.79 vs. consensus 3.76 on lower revenues and earnings
STT – Q4 EPS 87 cents vs. consensus 85 cents, revenues miss
STX – Q2 EPS 33 cents vs. consensus 33 cents, revenues in line
XLNX – Q3 EPS 58 cents vs. consensus 52 cents, revenues miss

Thu – GOOG, FCX, ISRG, MXIM, SBUX, UNP
Fri – BAC, GE

SPX
Resistance: 1,281, 1,300
Support: 1,256, 1,241, 1,220

The short term 3 day trend is neutral.
The six-month trend is up.
The twelve-month trend is up.

Trade with the trend of the chart you are trading.

Bullish entry signal is a bounce off support and a break above the high of the low day or a break out of horizontal resistance.

Bearish entry signal is a break of short term support or a bounce down from the 30 DMA or other resistance.

AAPL -1.81 – large black candle after gap up open after earnings
AMZN -4.38 – large bearish engulfing
NFLX -2.81 – black spinning top, above breakout after MACD bullish divergence
QCOM -0.89 – black spinning top
GOOG -7.88 – dark cloud cover
BIDU -0.84 – black spinning top

NDX 100 stocks stronger than the NDX include DLTR, ROST, BMC, CMCSA, ORLY, CHKP, SRCL, ORCL, AMAT, CA, INTU and SBUX.

Stocks weaker than the NDX: LLTC, MYL, LRCX, STX, MRVL, MU, RIMM, SNDK, FSLR, NVDA, VMED, APOL, JOYG, SHLD and XLNX.

Stocks to Watch on Thursday
Holding Above 30 DMA
SINA, NDAQ, SMH, RVBD, CAT, FWLT, PCX, CLF, VMW, SNDK, CRUS, HOLX, A, DHR, DOW, PNC, DE, FAS, JEC, STI, ZION, ACN, BAC, NYX, IPI, ATI, CF, URE, AGU, MOS, POT, UNP, BA, SWN, UNG, ARUN, NETL, VECO, CRM, TBT, TSL, DLR, GMCR, HANS, HUM, HSY, LDK, MHS, NTES, UCO, CAM, SLB, SOHU, TIE, ATW, FDX, SKX, CMG, PCP, MA, SPG
Moving Above 30 DMA = 1
CHL
Moving Below 30 DMA = 10
AIV, ESI, FCX, GS, LVS, LXK, MCP, SWK, UAL, WLT
Staying Below 30 DMA
DECK, WHR, AMD, HLF, CREE, X, AKS, GME, ICE, GES, TLT, HAS, V, CSTR, MCD, FAZ

Intermediate Term Market Trend: Up
Short Term Market Trend: Neutral