• Daily Game Plan – Broad-Based Selloff

    by  • April 3, 2013 1:54 pm • Broad Market Analysis, Bryan Sapp’s Daily Game Plan, Charts to Watch • 0 Comments

    MARKET CHECK

    After the past few weeks, markets looked untouchable, as seemingly every dip amid bad data was bought.  However, this isn’t exactly the case today, as most major indexes are off by more than 1%.  Both the ADP Payrolls data and the ISM Non-Manufacturing reports came in worse-than-expected, but bears were late to aggressively sell on this news.  The majority of the day’s selloff came after 11:00 AM, and indexes are currently sitting near their lows of the day. At present levels, the Russell 2000 is the weakest of the group, down 1.5% on the day, while the S&P 500 and Nasdaq are both off about 1%.  Bonds are seeing a strong bid, up about 1%, and metals are miners are getting hit hard.  Both gold and silver are off 1.4% on the day, while miners are nearly 5% lower.  As you would expect, volatility is spiking, with the VIX up about 9%.

     

    CHART OF THE DAY

    Facebook (FB) – The social media giant has been weak for some time, but there are signs that a tradable bottom could be in place.  The shares recently pulled back near the 25 level, site of former resistance, and have since bounced.  Coincidentally,  the recent selloff found support at the 200-day moving average, which just began registering given FB has only been public for that long.  This trendline, coupled with former resistance, could now act as support.

    In addition to the technical setup, there is huge put open interest at the April 26-strike.  Those short these puts have incentive to bolster the shares going forward from here.  Tomorrow, FB is set to unveil its new software for Android devices, and this could act as a catalyst going forward.  There have been leaks of the alleged new technology, but we cannot be certain as to the exact ramifications until tomorrow’s official release, which still has upside surprise potential.  I like a long entry here with a stop on a close below 25.  I would initially target a move to 29, with 32 as a stretch target.

    courtesy of stockcharts.com

     

    WHAT I’M EXPECTING

    I’m currently watching the 1550 level on the SPX like a hawk.  I honestly have no clue as to the direction of the next move, but selloffs like we’ve seen today(big swoons amid strong uptrends) have the potential for quick acceleration should we be unable to find any footing.  For that reason, all long positions are currently on a very tight leash.  There is some serious blood out there in certain sectors, and the indices are in no way indicative of how bad things really are today.

    About

    Bryan Sapp is a Senior Trading Analyst at Schaeffer’s Investment Research, where he has specialized in volatility-based options trading since early 2010. With Bryan at the helm, Schaeffer’s Volatility Trader generated a 2012 portfolio return of 70% for subscribers. This real-time option recommendation service exclusively trades short-term straddles. Prior to joining the research team at Schaeffer’s, Bryan honed his skills as a speculator by trading his own account, and playing poker professionally to pay his way through college. Bryan attended the University of Louisville, where he received his Bachelors in Economics and an MBA with an Entrepreneurship focus.

    http://www.schaeffersresearch.com/

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