Serge Berger is the head trader and investment strategist for The Steady Trader. Sign up for his free weekly newsletter.
The first trading day of September 2011 goes to the bears. Of course, after rising more than 5% over four trading days, stocks were due for a breather, and a 1% pullback in the case of the S&P 500 isn’t anything to freak out over.
After breaking and holding above the 1,200 level on Aug. 29, one could argue that 1,200 needed to be retested before possibly making a run into the 1,240-1,260 area. But given the low-volume action yesterday, it is difficult to read too much into it. As I keep pointing out, ranks at trading desks are thin as many of the important players are already enjoying the long Labor Day weekend.
The underperforming sector yesterday? Surprise, surprise: the financials. They, along with small-cap stocks, led the tape lower and closed right at the lows of the day. As such, the daily candle on the Russell 2000 small-cap index was fairly ugly.
Additionally, volatility as measured by the CBOE Volatility Index (VIX) remains elevated above the 30 area, which:
- Tells us that investors remain skeptical of the market and anticipate further volatility; and
- May make options selling strategies attractive again once it becomes clearer that the oversold bounce has run its course and stocks are ready to slide lower again.
In terms of sectors, the chart of the energy sector as measured by the Energy Select Sector SPDR (NYSE:XLE) is at a solid resistance area, which should it fail to serve as resistance, could lead the sector to run into its 200-day simple moving average currently near the $68 level before turning down again.
Today, eyes are all on the August jobs report, which could cause a good amount of volatility. However, as discussed above, few of the big players will be present, and even fewer will make major moves today. Your best bet is still to wait and see as September is sure to test us once people come back to the trading desks after Labor Day.
