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Minyanville's T3 Morning Market Call: Market Looks to Find a Bottom


After a slow, methodical correction, fear may accelerate the push downward.

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Overseas headlines continue to control this market as it seems the foot that keeps kicking this can down the road is getting a bit fractured. Whereas before. Europe was slogging through the mud, now they are sinking into quicksand ever since leadership was voted out in France and Greece snubbed all those that bent over backward to rescue them.

Technically this market has been broken and a "sell" since May 3 and 4. This correction has been characterized as slow and methodical, and in order to get a sustainable bottom you need acceleration and fear! Markets have been working lower and are getting closer to the macro targets I gave a few weeks back. The McClellan Oscillator is around -50, which is oversold but not extreme like we usually see to get multi-day bounce-type moves. That typically happens around -70 to -85.

Yesterday's pivot low (1328) is the first spot to watch today. We could get a juicy "Red Dog Reversal" soon that actually might last for more than a few hours. This strategy can be used for multiple stocks today as lots are almost ready for a small countertrend tactical move!

The 1318-1322 zone is the 38.2% Fibonacci retracement level. If we see this today, I think you're playing with fire if you don't cover shorts here (if you haven't already).

The 1295-1305 level is the measured move of the head & shoulders pattern that triggered as when we closed below the 1360-1365 neckline.

Resistance stands at the prior pivot area of 1343-1345, with a bigger zone at 1360-1364.

Commodities have been broken most of this year and continue to get crushed. At some point this will be a positive for America. Gold is approaching the pivot low from late December, and there could be some action today in that zone ($1,523 on gold futures and $148.27 in SPDR Gold Shares (GLD)). If you've been short this metal congrats, and if you take trades along the way, this could be a spot to cover or look for some type of cute long.

September 6 was the outside day that marked the high ($1,900ish) for gold and 2/29 was the day the intermediate downtrend took control. The macro trend also seems to have broken with bigger support down around GLD $140, so know your time frame. Gold hasn't had an identity this entire year, so it's been more technical.

Coal and solar names have been in liquidation mode as they have been the weakest groups all year.

The key to making money in this tape is to know your time frame and know what you're good at. Quick tactical trades are working and staying net short for lower targets in this corrective phase. Longer term folks also can't be so upset if they have a multi-year approach as we are only about 6% off the highs.

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Scott Redler is short SPY, AAPL.
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