Oil Crunch, Shorts Punch, Financial Sector Out To Lunch…

S&P 500 (^GSPC)  60 Day, 60 Minute

The only thing I will say about today (Monday) is that the breakdowns that occurred across the board in the financial sector have put a serious damper on the March rally.  If you are holding financial sector tickers for the long haul, try to take as much profit as you can from them tomorrow morning.  Let’s take a look at some key technicals that took place within the financial sector names in my Weekly Watch List during today’s trading session:

1. Bank of America (BAC) is nearing its Support #2 ($5.65) outlined from last night’s chart.  BAC broke down from its Ascending Triangle formation, showing a considerable amount of price weakness.  The only issue with this breakdown is the lack of volume accumulation or distribution, and until one or the other occurs, BAC will continue to follow whatever the overall market does.  A large amount of volume distribution is needed in order for the March Rally to be illegitimate.
2. Goldman Sachs (GS) is close to forming a Head and Shoulders around the $105-$106 price level.  Watch for a price pop tomorrow morning, and the $105-$106 level to hold.  If this occurs, we’ll need to see a large amount of volume distribution to confirm this possible technical formation.
3. Ultra Financials ProShares ETF (UYG) wasted absolutely no time breaking down below the Wedge of Death this morning and throughout today’s trading session.  The 200-Day SMA and Support #2 ($2.25), which were seen/outlined in last night’s chart, are key technical indicators in determining price targets/potential swing reversals in UYG.  Volume, like the other financial names, is lagging.
4. Financial Sector ETF (XLF) was removed from my watch list and replaced by SKF.  I am looking to get into SKF around $100-$105 if there is a morning market pop tomorrow.  In my opinion, this range would be an ideal long-term snag if you want to get short financials.
5. Watch Direxion Financial Bear 3X Shares ETF (FAZ) Resistance #1 ($28.31) VERY closely.  If the market is persistent in going back to total bearishness before rallying again, I wouldn’t doubt that we see our first test on this resistance level by Wednesday.

All in all, the financial sector looks very weak, and before the leveraged iETFs get too expensive and you are caught chasing them, I’d begin to build short positions if you haven’t already.  One problem with this strategy is the lack of volume distribution OR accumulation within the financial sector.  This shows that the financial sector is still somewhat mixed about its current price trend, so watch for volume breakouts across the financial sector.

My positions are developing nicely, and boy, did it take them long enough.  FAZ is still lagging, but UltraShort Real Estate ProShares ETF (SRS) and Direxion Small Cap Bear 3X Shares ETF (TZA) rocked today.  SRS and TZA are both sitting on their 50-Day SMAs, as well as having overhead resistance at levels that both tickers tested today.  SRS’ price-to-volume divergence is currently strengthening the iETF’s price gains, while TZA is being driven by the small cap destruction across the board today.

With that in mind, Direxion Small Cap Bull 3X Shares ETF (TNA) is developing into a nice swing trade off of Support #1 ($15.36) if the ETF gets beaten down all the way to this level.  Again, volume is key in determining whether the ETF will push higher or bounce off of its new Resistance #1 ($16.96).

With the financial sector out of the way, Oil is something I would love to dip buy in the near future.  Because of this, I will sit on the sidelines in the “shorting oil” process and wait for Direxion Energy Bull 3X Shares ETF (ERX) to reach $22.00 and PowerShares DB Double Long ETN (DXO) to reach $2.56, both of which are Support #1’s.

Watch the Crude price to drop to $42-$45 before getting involved, especially if the overall market trend becomes extremely bearish again.

If U.S. Exports are low on the Crude Report at 10:30am Wednesday, I’d be keeping a very close eye on oil names.

Tomorrow’s Mental Reminders:

1. Financial Sector Price-to-Volume relationship
2. The VIX (^VIX) is on the verge of breaking out or dropping back into the low 40’s, possibly setting up a small bullish flag within the S&P 500 (^GSPC), Dow Jones (^DJI), and Nasdaq (^IXIC) alike.

And with that, I leave you with a couple of chart repeats that were mentioned above, as well as a sneak peak to tomorrow’s post that will be dedicated to the weekly Economic Data.  Enjoy your evening, and good luck to all tomorrow:

FAZ  20 Day, 30 Minute

SRS  30 Day, 60 Minute

TNA  30 Day, 60 Minute

VIX  20 Day, 30 Minute

Consumer Confidence Statistics (Courtesy of Econoday)

ISM Manufacturing Index Statistics (Courtesy of Econoday)

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