Tuesday Was Ugly: Short-term Caution Advised
- Posted by JC Parets
- on August 21st, 2012
Big time reversals today at important levels. And that’s a problem. At least for the short-term. Now, I don’t think that this changes the bigger picture, which still looks positive to me. But this could be trouble, at least for the rest of the month. I’d be careful here:
The S&P500 reversed lower at key resistance:
Same thing with the Dow Industrials:
Same in the Nasdaq100:
I can keep going but I think you get the point. Now look at the other side. Treasuries reversed higher:
The $VIX reversed higher at former support from March:
I would be very careful here in US Equities. We had a great run (12.5% from the June lows), but I think it would be irresponsible of us not to accept that there is clearly supply at these levels. There are other trending assets out there. Look around.
So how long should we be cautious in the US Equities markets? I think the answer may come from America’s favorite stock. Ever since the “Instagram Top” in $AAPL, it hadn’t made new highs until this past week. That means it took over 4 months before retesting those all-time highs. Granted, this week $AAPL took those highs out and all the rage was about how it became the most valuable company of all time. These are the sort of headlines that scare the heck out of me, especially when they show up in the freakin’ USA Today. Not what you want to see as an $AAPL Bull. Mainstream newspapers getting into the mix is that last thing you want.
Now, if $AAPL can hold on to these new highs without rolling over, this should be a temporary pullback/consolidation for the stock and probably US Equities as a group. But if those new highs were just temporary and $AAPL rolls over leaving those fresh buyers out there high and dry, look out below.
Just my two cents.
Sorry if this comes off as a bit scary, but it should be. This isn’t a game. Risk management is Job #1. And days like this at such key levels raise red flags. Listen, I’ve been as bullish as anyone, but we want to check our ego at the door and try to keep an open mind. We’re choosing to be extra careful here.
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J.C. Parets is the Founder & President of Eagle Bay Capital, LLC. He earned the Chartered Market Technician designation (CMT) and is a member of the Market Technicians Association. More
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