Stock Market Analysis August 21 2013

Morning Stock Market Thoughts For August 21, 2013

— Futures are pointing lower once again. So naturally I’ll be watching the open closely to see if we continue to unwind, or if the bulls can step in for some price stabilization. I’m not holding my breath. Bonds are down pre-market too. So it looks like sellers might be in control.

Trading Thoughts On Stocks I’m Watching Today:

I’m hesitant to add to any of my positions, especially on continued broad market weakness. I’ll be cheerleading SNV. But I don’t have big plans for the day, beyond that.

I also think BRKS is at a very interesting point. I read the most recent BRKS conference call last night. And I can’t help but feel the price action is a little out of tune with the fundamentals. While I think the company is well positioned for the long term, it may take some time for the market to recognize this. So I would caution you to build a position slowly (and I’ll do the same).

Other Thoughts and Good Articles I’ve Read Today:

Emerging Market Central Banks Scramble!

Derivatives Making A Comeback… What do you know about CLOs?

— Where will you be at 2pm ET? And what do you think will happen when Fed Minutes are released?

Mid-Morning Update: Existing Home Sales Shot Up 6.5% — This is up 17% from the same month last year, and above expectations. So sounds like good news right? Well…

While XHB immediately popped, it has since faded, giving back most it’s gains. And the market as a whole remains quite tepid ahead of the Fed meeting minutes that are to be released this afternoon. So as I mentioned on Stocktwits earlier, we need to be aware of “market logic.” What do I mean by this?

Good data might support the Fed tapering narrative, which will ultimately weaken the “Bernanke Put.” And of course even if none of this actually plays out, traders are always posturing for position on what might happen. You’ve got to remember: the market’s reaction to the news is more important than the news itself. So watch closely. SPY and QQQ are bouncing around in a range. But IWM is careening lower, which might be your tell. XLF (and my SNV position) are at lows of the day and not inspiring action either.

Tread carefully here.

Trick! IWM is now reversing higher into the Fed announcement. Volatility, like whoa.

Stock Market Day In Review August 21 2013

Well, that was a wild ride. I always shake my head on days like this. The market was down, then up, then down, then up – 100 points at a time too! I don’t need to tell you. You saw it.

Now that this wild price action is all in our rear-view mirror we can objectively evaluate what went down. So are you sticking to your guns, like ForexKong? Or do you think this is “blue sky” territory.

Hell, maybe you’re sitting on the fence until Jackson Hole. I can’t judge you either way. Just watch the tape as we go. And I’m happy to tell you what I’m doing; although, it may annoy you…

That’s because most of my core positions are in small cap stocks that are relatively insulated from the whole market. Of course SNV was influenced by the news, and like the rest of the market Synovus faded hard into the close.

One thing is for sure: Bonds were the losers (yet again), with TLT unable to find much in the way of stability. I’m going to be cautious going forward and use my cash reserves carefully. I like my cost basis in most of my positions.  That said…

The open tomorrow will be particularly interesting. If we see a gap that gets sold down, that would be an interesting plot twist and might force a serious reconsideration. Otherwise if we stabilize and breadth stays around 40% I’d say the damage would be contained for now. We’ll see.

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