Key Tactical Takeaways:
> Although the VIX did not close above its lower sloping short-term stop at ... on Thursday, evidence suggests that volatility should remain relatively buoyant.
> The focus for the S&P 500 has been and will remain the completion of a measured move to ..., pending a close above the short-term stop at .... If a washout decline to this area occurs today, we'll be taking profits on several of our current short ideas.
> Despite gold's reflexive stability upon entering the first Tactical Liquidity Zone in the last 24-48 hours, measured upside potential to the ... area in DXY and measured downside potential to ... in gold prices leaves the yellow metal vulnerable over the near-term.
Some Quick Thoughts:
TGIF! Does anyone else long for the days when we can celebrate the end of a hard work in the warmth of a local pub, surrounded by good friends? For now, let's just celebrate the fact that we remain on the right side of this difficult market. Actually, let's keep the celebration to a minimum, as now comes the difficult task of trying to find the next tradable low.
Tactically speaking, we like the fact that tech and cyclicals have been holding their own relative to not just the S&P 500, but the risk averse utilities and staples sectors, as well. Bigger picture, though, seeing key European indices like the German DAX and French CAC (currently -1.7% & -1.5%, respectively) only just starting to roll below multi-month ranges, European bank shares undergoing outsized deterioration, domestic corporate spreads widening to levels not seen since mid-July, and the seasonal pattern warning of US equity weakness through mid-October all lend credence to the idea that this tactical low we are trying to identify should not be expected to launch the same kind of swift return to new highs that has become so commonplace since the panic lows of March.
Speaking of Germany, we'll be looking to use any short-term bounce as a means to get short the iShares Germany ETF (EWG), with a near-term target that extends .... Domestically, while the official signal that the short-term downtrend has been reversed won't occur until SPX closes above 3294, we suggest using any overshoot to the S&P's measured target area (...) as a reason to take some profits on any S&P 500 correlated short positions.
Following the failed break above a multi-year range in July, then again in August, we're watching the Shanghai Comp. closely. Down 0.12% overnight, this index must hold 3174.70 to prevent confirmation of a popular topping pattern with downside potential of 10% to follow.
This is an abridged version of our premium content. If you'd like to have content like this sent to your inbox each morning, please click here to sign up for a risk-free, 2-week trial (no credit card required).
Please follow us on Twitter @xtractanalytics