Markets are once again slowing moving back and forth, as volumes have dried up and most participants appear uninterested. After coming within a stone’s throw of the 1525 level on the S&P 500 this morning, markets sold off about a half percent to the lows. Since then, they’ve stabilized, but are still in the bottom half of the day’s range. Currently, the Nasdaq is leading us higher, up 0.3% amid strength by AMZN. The Russell 2000 and S&P 500 are both near flat on the day. Bonds are seeing some sellers, as today’s 10-year note auction was met with strong supply and lack of demand. Metals and miners are again weak, as those assets are down about 1% on the day.
CHART OF THE DAY
Diamond Foods (DMND) – The much maligned nut company saw a big move on Monday amid heavy volume. The company has been under an SEC probe in regard to its accounting practices, the stock has obviously been hammered on that news. However, there are signs that there could be a tradable bottom in place for a quick long position.
DMND broke from this symmetrical triangle on very heavy volume, and the stock since checked back and bounced today, indicating potential support. Currently, 36 percent of DMND’s float is sold short. Given what happened on Monday, the current environment in that stock is very precarious if you are an aggressive bear. Should DMND continue to move higher, these shorts will be forced to cover, which would act as a tailwind toward the shares. The chart pattern on DMND is what’s knows as a symmetrical triangle, and a break of this pattern implied a move back near the 18 level. I’d look to enter here with a stop below Tuesday’s lows of 15.25. Initially target a move to 18, with a full gap fill back near the 20 level being a possibility.
WHAT I’M EXPECTING
Given the move to 1525 today and the aggressive selling we saw there, the S&P will likely now enter a range between 1500 and 1525. It’s tough getting inspired on either side here and now, but individual stock setups still remain.