Karpel’s Corner: Bears Watch for Broken Resistance As a Sign of Support

Welcome to Karpel’s Corner. This is where I throw out my thoughts on the markets and share some of my favorite strategies. I keep it market-focused, and never miss an opportunity to teach trading strategies and commentate on the latest trends affecting the financial markets. Hope you enjoy today’s post!

The market got a little ugly with the major averages, $QQQ and $SPY, down by almost 1 percent. Now, this is not monumental nor does it shatter the current trend. But when you have not had a move like this in almost 6 months, well, it gets you wondering where the support is.

I’ve spoken about how the small-caps ($IWM) are weak . So, where is support now that the weakness has picked up? For $IWM we have support coming in at $112, and we’ve been seeing lower highs over the last month and a half. A break below this support would be a convincing move that the Bears are potentially gaining more control, especially in the small-cap domestically concentric stocks. Now, it would be a stretch to say that this is going to trigger the larger caps to crack, but it is worth tracking.

One other market segment that has garnered our attention on the downside move is in the tech sector, specifically internet stocks ($FDN), Cloud computing stocks ($SKYY) and Social Media ($SOCL). There has been an expansion to the price move to the downside in these three sectors. We have seen volatility expand over the past three sessions by almost two standard deviations, which is notable for the Bears. Names like $NFLX, $FB and $AMZN, are all now susceptible to some pullback–which by the way, with this latest set up in the overall segment, should be respected.

Today, I’ll be keeping an eye on Finance $(XLF), which just broke through support at $23.5. Just want it on the radar.

See you next time at the Corner!