A backdrop with a mounting pile of negatives proved too much for stocks to dodge this week, as the Nasdaq put in its worst session in over six months on Tuesday. On the bright side, both S&P and Nasdaq are successfully testing their Sept. 20 lows by coming down on lighter volume. This suggests reduced selling pressure, a mild positive.
The backdrop is ominous. From rising inflation to rising bond yields to a Chinese economic slowdown to a worsening supply chain disruption to dysfunction in Washington which threatens the sacred, gold-plated U.S. credit rating, the market is contending with a lot.
It is unlikely the government will default on its debt, as talk of the use of a trillion-dollar platinum coin made the rounds earlier in the week.
That the market's swoon is occurring in the notorious month of September heading into October heightened the intrigue.
Otherwise, there remain virtually no long-side pattern setups for the breakout trader. The strength in the market resides most conspicuously in the oil & gas explorers. As noted on Twitter, "There are more oil & gas explorer names showing relative strength, constructive cups, and trading close to their 52w high than any other group in years."
Our triggered trades in the group have gained, with Range Resources (RRC) up 26% in three weeks and Devon Energy (DVN) up 9% in four days. The patterns are dovetailing with the cup formed by crude oil. It is hoped that additional exposure to this group may present itself.
The growth sector remains off-limits on the long side. All members of the Big 5 group are below the 50 ma. Their performance has been key in recognizing general market direction. Short positions in these issues may present themselves following the next rally. At the moment, they are materially extended to the down side.
If September is the most treacherous month of the year on average, then October has provided more important buying opportunities than any other. Let's keep our eyes and ears open to what may present itself in the days ahead.
The following name is believed to be the most attractive for our strategy of speculation in the $13+ market.
Oasis Petroleum (OAS)
In summation, with the exception of the above, the long side is off the table for fresh-money buys. This could change quickly, so we must be alert to incoming technical information on a day-by-day basis. October has a history of producing buying opportunities: This should be respected.
Cash is king.
Introduction to the service video (38:00)
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Bread and butter pullback: Pt II video (15:09)
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