• Daily Game Plan – Markets Slide Amid Weak Data

    by  • February 21, 2013 2:05 pm • Broad Market Analysis, Bryan Sapp’s Daily Game Plan, Charts to Watch • 0 Comments

    MARKET CHECK

    Markets are seeing another day of weak price action, after some not-so-cheery data points this morning.  Prior to the open, we saw jobless claims numbers that were slightly higher than expectations, and at 10:00 the Philly Fed data came in much lower than expected.  As you would guess, the market slide was exacerbated by this negative economic news, and indexes are currently near their lows of the day.  Presently, technology is leading us lower, with the Nasdaq off by about 1.4%.  The Russell 2000 and S&P 500 aren’t far off, down 1.3% and 0.9%, respectively.  Miners and metals are seeing some relief today, as gold and silver are up between 0.5% and 1.0%, while miners have bounced sharply, up 2.0% at present levels.  Whether or not this is a “dead cat bounce” remains to be seen.  Bonds are seeing a bid today, up 0.8%, and volatility is again spiking, as the VIX is up by over 9%.

     

    CHART OF THE DAY

    Kohls Corp (KSS) – With markets starting to roll over and many charts starting to look broken, I’m becoming interested on the short side of the market.  I really like the look of KSS below, as it is forming a bear flag on a weekly basis, and recently failed to overtake its  200-day moving average.  KSS has underperformed over the past 52 weeks, down nearly 10% amid a very strong market.

    Despite its underperformance, sentiment toward KSS remains bullish to neutral.  Currently, 7 of the 17 analysts covering the equity have it rated a “buy,” with 9 “holds” and only 1 “sell.”  Should KSS continue to struggle technically, this creates an increased potential for future downgrades, which would have a dampening effect on the equity.  Additionally, short interest is near two-year lows on KSS, creating an opening for a new round of bearish speculation.  I like a short entry near current levels, with a stop on a close above the 200-day moving average, currently 48.23.  I would initially target a move down to 43, with 40 being a stretch target.  NOTE: KSS reports earnings on 2/28, so hedge your risk ahead of that event and/or lock in some profits that you may seen between now and then.

    courtesy of stockcharts.com

     

    WHAT I’M EXPECTING

    Given today’s follow through of yesterday’s weakness, I’m looking for a break of the 1500 level on the S&P 500, and a push toward 1475, the highs from last September.  Even though volatility has spiked sharply over the past two days, I’d be a buyer of it on any weakness.

    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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