Seven-Day SPY CorrectionDown -5%, Forms Inverted Hammer...MSFT Lower on Downgrade...

Two out of nine sectors moved higher on Tuesday…XLE, XLI and XLU were the strongest sectors and XLY was the weakest.

 

Breadth strengthened as decliners led advancers…1.40 to 1 on the NYSE and 1.22 to 1 on the NASDAQ.

Tuesday – strengthened, decliners led

Monday – strengthened slightly, decliners led

Friday – weakened, decliners led

Thursday – strengthened, advancers led

Wednesday – weakened, decliners led

SPY down 1.60 at 197.91 on 259.5 million shares

VIX up 3.15 at 23.57…

TNX down .45 at 20.71…

TLT up 1.56 at 127.60...

XLF down .23 at 23.69 on 36.9 million shares

AAPL down 1.48 at 106.74 on 60.7 million shares

FB down 2.30 at 74.69…on 31.5 million shares

Technical Commentary:

IWM – 0.14%, DIA – 0.55%, SPY – 0.80%, QQQ – 1.60%.

Each of the broad indexes had a volatile session fluctuating from negative to positive before ending the day lower on a late selloff. Tech stocks and retail stocks were especially weak.  XRT -1.15 -1.24% closed below its 30 DMA.  SPY is down -5.07% over the past seven trading sessions from its all-time high on Dec 5.

The VIX 23.57, had its highest close since Oct 16.

The NDX -67.81, -1.63% was led lower by losses in MSFT, which gapped lower on a BAC downgrade, GOOG, AMZN, FB, GILD, BIIB and ESRX which combined for more than 32 of the NDX points.

Semiconductors $SOX -0.66% like other indexes spent much of the day higher before closing lower and forming an inverted hammer candle pattern.  Strength in AMAT, ARMH, ASML, SUNE, NXPI and RFMD was offset by 24 stocks closing lower.  ADI, ALTR, AMAT, ATML, AVGO, INTC, KLAC, LLTC, TXN and XLNX continue to be bull flag setups.

SPY, DIA and IWM each formed an inverted hammer as did XLB, XLE, XLF, XLI, XLK, XLP and XLY.  While the short-term posture is bearish the inverted hammer suggest we should look for a potential short-term reversal.  Remember the combination of an intermediate-term uptrend and short-term downtrend is a potential setup for a bullish entry.

If the broad market finds support and bounces, look for bull flag setups in stocks that are still in an uptrend.

Trade with the trend of the chart you are trading and continue to move your profit protection stops.  Continue to follow your rules.

Short-term Chart Targets:

SPY = 207.33, 209.06, 210.49...

QQQ = 106.94…

IWM = 118.25, 119.37, 121.27…

Support Levels

SPY = 200.06...

QQQ = 102.42, 101.38…

IWM = 114.37, 113.35...

Q3 Earnings Reaction

Positive Reactions – ADBE, CIEN, LULU, AVGO, ADI, HPQ, PANW, QIHU, ADSK, JASO, ROST, SPLK, GOGO, RAX, NTES, XONE, YOKU, VJET, BABA, MNST, WFM, ABC, ACI, AMGN, BIDU, BWLD, CBOE, CLF, CLX, CNX, EA, ESRX, EQIX, EXPE, FISV, GLW, GPRO, GRPN, GT, HSY, JCI, JDSU, LNKD, LVLT, MA, MAR, MO, MTW, MYL, PCAR, FE, SCHN, STX, SWI, SWKS, TASR, V, WY, X, WHR,  AAPL, ALK, ALXN, APOL, BMY, BRCM, CAT, CELG, CERN, CHKP, CMCSA, CNI, EMC, EW, GD, HAL, HAS, HOG, ILMN, IM, KLAC, KMB, LLY, LRCX, LXK, MMM, MXIM, MSFT, N, ORLY, PG, RMD, STLD, STT, SWK, TRV, TSCO, TXN, UNP, VRSN, WOOF, YHOO, YNDX, ZION, AMD, C, CSX, DAL, GE, HON, LVS, MS, SCHW, SLB, STI, URI, XLNX, COST, BBBY, BBRY, MU, NKE, PAYX, LULU, PANW, ULTA, MFRM, SPLK,

More than 10% - GOGO, RAX, WFM, GPRO, GPRN, LNKD, BWLD, SWI, N, EW, TSCO, NKE, ULTA, LULU, PANW, MFRM,

Negative Reactions – COST, AMBA, MFRM, GME, CRM, JD, MBLY, SINA, YY, SWKS, FEYE, FSLR, PCLN, QCOM, TRIP, SCTY, SSYS, SUNE, UBNT, Z, ZU, AEM, CHRW, COH, FB, GRMN, KRFT, MDC, MRK, NEM, PNRA, RGR, SLCA, TPX, TWTR, ALTR, AMZN, BA, BTU, CMG, CREE, DECK, DNKN, DOW, EAT, F, GM, IBM, JNPR, KO, LMT, LUV, NDAQ, P, UA, VMW, XRX, YELP, AXP, BAC, COF, EBAY, GOOGL, INTC, JNJ, JPM, KEY, MAT, NFLX, WFC, AZO, ADBE, KKD, CIEN,

More than -10% - GME, CSIQ, FSLR, UBNT, ZU, AEM, P, TPX,

Reversal in progress – GOGO, P, PCLN, TPX, KO,

Reversal of Initial Reaction – AMZN, FEYE, SWKS, Z, ADBE, ALTR, ALTR, AXP, AZO, BA, BAC, BTU, CHRW, CMG, COF, COH, CREE, DECK, DNKN, DOW, EAT, EBAY, F, GM, GOOGL, GRMN, INTC, JNJ, JNPR, JPM, KEY, KKD, KO, KRFT, LMT, LUV, MAT, MDC, MRK, NDAQ, PNRA, UA, VMW, WFC, XRX,

The SPY Market Forecast is at 31. 

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Setups

Bull Flag: CIEN, DAL, GLW, JDSU, STI, SWKS, UAL, V, ADBE, AVGO, FFIV, WDC,   

At Support: AAL, ATI, BAC, CRM, CSIQ, CTRP, HPQ, QIHU, UA, YELP, WLT, YY, BIDU, DTV, FB, NTAP,  

Moves

H Breakout: UBNT,    

Bounce: MBLY, DDD,    

MACD Divergence Bounce:

Gap Down: HOG, ADSK, ESRX, MSFT,  

Support Break: KNDI, LVS, TSL, VRSN, YOKU, ZION, AMZN, ILMN, PCLN,  

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19 of 100 NDX stocks closed higher on Tuesday and one was unchanged.

Leading NDX 100 stocks included: SPLS, VOD, AMAT, CTSH, MNST, HSIC, DISCA, EBAY

Lagging NDX stocks included: ESRX, AMZN, TSLA, GOOG, MSFT, WYNN, ATVI, BIIB, FB, PCLN, NFLX,

Leading stocks > +2% on Tuesday: UBNT, GPRO, SPWR, DGLY

Lagging stocks < -2.0% included: SFUN, KNDI, QIHU, YELP, SSYS, MFRM, LOCO, AAL, HOG, TSL, DAL, Z, CTRP, TWTR, UAL, LVS, AA

Stocks to Watch on Wednesday

Holding Above 30 DMA= 21

ROST, DLTR, ORLY, TSCO, BBBY, PCAR, SPLS, INTU, AMAT, WFM, AVGO, WDC, ADI, ALTR, EBAY, LLTC, MXIM, FOXA, SIAL, BIIB, ADBE

Moving Above 30 DMA = 0

Moving Below 30 DMA = 18

BRCM, CELG, CHKP, CHTR, CSCO, DISH, ESRX, EXPD, FAST, FB, FFIV, INTC, KLAC, LBTYA, MAR, SBUX, TXN, VIAB

Staying Below 30 DMA

AMGN, CHRW, CMCSA, EQIX, GILD, HSIC, KRFT, REGN, VRTX, XLNX, YHOO, ADP, CA, COST, CTRX, DISCA, MAT, MDLZ, MNST, MU, NVDA, NXPI, SNDK, SRCL, STX, SYMC, VOD, VRSK, AAPL, ADSK, AKAM, ALXN, ATVI, CERN, CTSH, FISV, ISRG, MYL, NTAP, QCOM, ILMN, CTXS, MSFT, PAYX, SBAC, TRIP, AMZN, LMCA, LMCK, SIRI, GRMN, DTV, PCLN, BIDU, GOOG, TSLA, VIP, GMCR, WYNN, NFLX

6-month Intermediate Term Market Trend: Up

3-day Short Term Market Trend: Down