Thursday Failure – Warning Lights Flashing on our Market Dashboard


We're stillpainting the bounce lines red.

As I warned you on Tuesday, there's blood on the streets and we have now picked up 4 red boxes as each index has been taken down a notch this week and, with the Nasdaq (/NQ) failing it's 10% correction AGAIN at 6,870 and the Russell (/RTY) right on the -10% line at 1,495 – will the Dow (/YM) and S&P (/ES) be far behind?  For the Dow, that's a 700-point drop to 24,300 and the Dow (/YM) futures pay $5 per point per contract so I love shorting/YMbelow the 25,000 line with tight stops above.

  • Dow24,300with a weak bounce at24,800and a strong bounce at25,300
  • S&P2,640with a weak bounce at2,710and a strong bounce at2,780
  • Nasdaq6,870with a weak bounce at7,080and a strong bounce at7,230
  • Russell1,485with a weak bounce at1,530and a strong bounce at1,575

For the S&P (/ES) we're at 2,696 this morning so another 56 point-drop and we're all red on that index too.  On the other hand, if /ES can get back over 2,710, then playing /YM bullish ABOVE 25,000 with tight stops below would be the smart play – but even fixing Brexit wasn't enough to hold the weak bounce line yesterday for the S&P and Powell didn't save us last night so it's all up to President Trump to make a deal with China that will save the markets – what could possibly go wrong?

Oil and gasoline are also playing out our worst-case scenario from Tuesday, where I said:

> Oil fell for the 11th consecutive day and is back at the $60 line this morning and we still like it for a bounce but tight stops below.  As noted yesterday, $60 is 20% down from $75 and we could overshoot to $57 but, either way, we expect to see at least $63 into Thanksgiving and we did go long on Gasoline (/RB) as well at $1.615 but, so far, that's not working and we'll have to take a loss below $1.60 and wait to see if $57 gets tested on oil, probably lining up with $1.55 on /RB for our next opportunity to take a long poke.

We overshot the mark at $55 and $1.54 but we took the longs on the way back up and we'll see how things play out now with the EIA Inventory Report out at 11 am this morning and now we have 4 Fed Speakers today with Quarles at 10, Powell at 11, Bostic at 1pm and Kashkari at 3pm, which was not originally sheduled (see Monday's Report) so lots of things that can move the market today while we wait for word on Brexit (and now Italy is rumored to be leaving the EU) and, of course, CHINA!!!