Snapshot Notes - September 25, 2007

As of:

SPX 1519

Yesterday, we went over some precedents for the ugly-looking reversal on the Nasdaq 100, and surprisingly those kinds of events were not only not bearish, they tended to be quite bullish when looking out from five days to one month later.

That positive vibe seems to be on display today as the tech indices are outshining those with a broader base like the S&P 500. In the process, we're starting to get a few overbought signals for the NDX, but so far nothing too major. The problem for the broader market will be if the typical overbought reaction kicks in for tech in the coming days, then there isn't much on which the rest of the market can rely.

Retail, housing and financials continue to suck wind, with several of the indices representing those groups approaching or violating their August lows. In one respect it's positive that "the market" has hung in despite that, but in another it's going to be troubling in case technology loses its footing.

There isn't much that I'm doing at this point except watching tech more carefully than usual. I still think the area around 1500 is going to prove to be support for the short-term, and would consider adding to a small long position if we saw a move closer to that area this week, but for now I'm sitting tight and don't see that changing in the immediate future.

As of:

SPX 1519

HELP ARCHIVE

Good Tuesday morning...we begin the day with a gap down open, seemingly based primarily on poor retail guidance. The retail sector is getting hit hard, along with housing and some financials, many of which have given back most of last week's gains.

The theme I've been working off of since mid-week last week was that given the still-positive intermediate-term studies we've gone over, and the reaction to last Tuesday's FOMC decision (with the S&P 500 cash index breaking out over the 1500 area that had capped previous rallies), the first reaction back down towards the breakout area should set up a high-probability long short-term long trade.

By last Thursday, our short-term STEM.MR Model had indicated oversold conditions, however I held off on buying due to consistent negativity following option expirations, particularly in September. Most of that weakness was concentrated early in the week following expiry, so I felt it would make sense to wait until this week to try that long-side attempt.

We got some of that expected weakness yesterday, and now thanks to some poor earnings guidance from retail bellwethers, the S&P approached even closer to that 1500 area. Most of the decline came in the form of a gap down open, and since then the indices have been trying to climb enough to close the gap. I'm not adding to any long positions at this point, I want to wait and see how the selling pressure gets treated. A violation of the early low would obviously not be a good sign, and if that happens I suspect we'll see that 1500 area in short order.

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