What We're Reading

For day traders and swing traders, a trend day can be the difference between extreme profits and being left behind in the dust; having exited a trade too quickly.   Properly identifying a trend day early in the trading session is key to sitting on one's hands and not exiting too soon whether we're trending up and getting out (not fade) if you are short the market.   

Well known commodities and futures trader and President of LBRGroup, Inc. Linda Bradford Raschke points out something I feel of note right off the bat:  that trend days tend to occur after the market consolidates and digests gains; or what we call a few "inside days":

When a market consolidates, buyers and sellers reach an equilibrium price level — and the trading range tends to narrow. When new information enters the marketplace, the market moves away from this equilibrium point and tries to find a new price, or “value” area. Either longs or shorts will be “trapped” on the wrong side and eventually forced to cover, a

According to BTIG Research, there remains cause to be concerned after the stock market's bounce last week.

For the first time since the October low, breakdowns have outnumbered breakouts. This is a byproduct of the 5% pullback in the SPX over the past two weeks, which naturally saw some stocks break support levels. We are inclined to worry about breakdowns when they are abundant (at least 10% of the SPX, more than this time around) and recurrent (outnumbering breakouts for at least 2-3 weeks).

This last occurred in October, when the market suffered deterioration in breadth that was significant enough to suggest a structural shift may be underway. For this reason, we would be inclined to use strength to sell stocks that previously broke down or stocks that have exhibited weak relative strength.

Looking closer at a few of the internals:  A 5-year weekly chart of T2107, or stocks which are above their 200d SMA, has made a lower high and appear to be rolling over again -  almost a

Edited 9/24/14 7:40am

Market breadth has deteriorated badly once again. In fact, breadth hasn't been strong for several months (since early July).  Even last Friday, when the market gapped higher on the Alibaba (BABA) mania, breadth was negative — a divergence that proved to be significant so far this week.  Cumulative breadth has been a problem since July.  Were market makers (MM) merely propping up the market until the IPO went off?  Surely a market selloff leading up the launch could risk Alibaba founder Jack Ma to possibly post pone the event; a smear the market wouldn't want to face (not to mention unhappy investors).

I'm sure Jack Lew's comments at the G20 summit that he is pursuing methods to curb tax inversions (and soon) along with funds approaching end of their fiscal year is not helping matters. 

Cyclicals (XLY) and consumer staples (XLP) experienced big selling today; the former closing below it's 50d.  Retail (XRT) also closed below the 50d; filling the August gap howev