The Ugly Stick
It’s not a fire sale, gang… but I bet this market has your attention. the Ugly Stick was out, and about today, and the Stick was angry. The lead story today would be Oil. Massive inventory builds do actually impact the supply/demand equation. What do you know? The good thing about WTI Crude threatening to go below $50 a barrel? They’ll produce less. OPEC tried. Their friends tried. It kind of, sort of worked for a while. That $50 support becomes resistance, and then we’ll see what’s what. Oh, did I mention dollar strength? Yeah… maybe we should stick to commodities. Gasoline, Gold, Silver, Corn, Wheat. Line ’em up. Now, knock ’em down. Stocks? Let’s go there.
The Energy sector obviously took a crowbar across the back, but they weren’t alone. Pressure on the bond market also put pressure on the bond proxies. Utilities, Real Estate, Telecom. Ugly. Winners? We actually had some of those. The Health Care sector. A little confusion in Washington goes a long way when you’re the 800pound gorilla in the room. Not to mention… wait for it… the retailers. Oh, take ’em. Suddenly, all the cool kids are headed to the mall headed to the mall. Macy’s (M), Nordstrom (JWN), Kohl’s (KSS), Foot Locker (FL), Signet (SIG), and Dollar General (DG). Take, take, take.
SPX: The index hit the wall at 2373, and finally got support at 2361. In both cases a tow point haircut from my level … meaning that I didn’t help you all that much. On a moderately positive note, our 2366 spot did act as initial support, but failed to turn into an effective pivot throughout the afternoon.
RUT: As for the small caps, our 1378, and 1371 levels worked extremely well for most of the day. A technical negative for the index would be that once the dam broke, support was never regained at any level, unlike the broader indices. Bear in mind that the index cracked the 50 day SMA, and now stands nine points below it.
positions in stocks mentioned: short M puts, long KSS equity, short SIG puts