Markets are continuing yesterday afternoon’s slide, as fears of an attack on Syria continue to grow. There were numerous comments made today by different global leaders, and it appears that the threat of a U.S. attack is very real. Futures were treading water overnight, but the European market open was met with aggressive selling. Since then, markets have essentially done nothing but go lower, and stocks are currently near their lows of the day. The Russell 2000 is today’s major laggard, off 1.8% from yesterday’s close. Other major indexes are down anywhere between 0.8 and 1.6% on the session. Gold is catching a strong bid, possibly as the “fear trade” grows amid these macro worries. The metal is 1.2% higher on the day. Additionally, bonds are moving swiftly higher, up 1% on the session. Volatility is getting bid up as well, with the VIX higher by over 10% on the session.
CHART OF THE DAY
Deere & Co (DE) – The farm machinery concern has been weak this year, down about 3% since January and majorly lagging the broad market. The shares have been capped by their 80-day moving average for some time, and the recent bounce into that trendline could be an ideal spot to make a bearish play. Despite its weakness, sentiment in the options market is near a bullish extreme, indicating that speculators continue to make bets on future upside in the stock. These options could act as a headwind toward DE going forward, and cap any major rallies.
I like a bearish entry here with a stop on a close above 86. I would initially target a move down to 80, with 75 as a stretch target.
WHAT I’M EXPECTING
The S&P 500 broke the key 1640 level today, and now appears headed toward 1600. I am going to avoid the bull side until there’s some sort of sign that buyers are stepping back in. There is some support around 1625, so key an eye on that level as well.