The markets

All the indexes were down substantially. The UVXY, a measure of intraday volatility, was up substantially, 9.94%. You could have had a very good trade on the UVXY. I was only recently telling my elite students how to trade on the UVXY. You can use it to make substantial profits. If you look at the UVXY and SPX on a five-minute chart, you can see that the S&P 500 started to sell off around 1.30pm (New York time) and that’s when the UVXY began to spike upwards. Buying call options on the UVXY strategically and at the right time, according to the rule and techniques that we use means you could have done exceptionally well. There are charting patterns that just scream at you!

The Russell 2000 was down the most of the major indexes, 1.73%. The S&P 500 was down 0.95%. The Nasdaq also broke down, as I had expected it to do on Wednesday but it moved up that day. On Thursday it was down 0.9%. Transports were down 0.72% and the industrials were down 0.74%. Everything down, including the bonds, which was surprising. With the bonds being down, it makes sense that the interest rate-sensitive REITs (real estate investment trusts) would be down.

The sectors sink

Looking at the sectors, XLRE (real estate) was down the most, 1.81%. Many of the sectors were down more than 1%. XLV (health care) was down 1.29%, while XLY (consumer discretionary) was down 1.02%. Biotech, which was up strongly yesterday, was down strongly today, 1.54%. Finally energy was down 1.11%. Technology, the biggest sector, was down 0.91%. With the two largest sectors, XLK (technology) and XLF (financials), both down, it was highly probable the markets were going to have a down day.

Winning trades in different sectors

XLV (health care) was down 1.29%. Let’s look at a stock within healthcare, MNK. On the five-minute chart, you can see it broke the opening 30-minute range low at $44.88 around 10.10am and then moved down strongly. With put options, you could have made a very nice profit there. In the biotech sector, note FMI. Again it broke the opening 30-minute range low of $38.40 and then had a nice move to the downside. A REIT like AVB was a great trade to the downside. On the five-minute chart, it had a very nice bear flag breaking below the opening 30-minute range low at around 10.15am.It had a strong move to the downside. PSA, another REIT, also moved down, 1.3%.

The Nasdaq has a gap to fill at 5440 and that could play out, so you must watch it. The Nasdaq and technology were both down considerably, almost 1%. Please, keep an eye on them.

Another reason the market was down, was because the ADP US employment figures were released. In the US 158,000 new private sector jobs were created, but the analysts had expected 185,000 new jobs. The market wasn’t impressed that the figure was below expectations. Also many of these stocks could be perceived as over-valued as Janet Yellen (Chair of the Board of Governors of the Federal Reserve System) had said that earlier. Her statement, of course, had an impact on the market. The Non-Farm payroll figures also come out tomorrow. Let’s see how that impacts the market.

Going forward …

There is bearishness in the market. The Nasdaq for so long led the market up, will it now lead the market down? Smaller capped stocks are really moved down. The IWM (the Russell 2000) broke below the 140 support level. I will definitely keep watching that.

I am expecting more downside movement from stocks like Tesla, which had a big move down on Wednesday and Thursday. It was down $18.26 or 5.58%. Yesterday, while day trading with my students, I bought the July week-one 335 put options on Tesla. I had five of these and closed four out and kept one running. I bought that for $6.85, it is now worth $26.15. I made just shy of $2,000 on that one contract. It was riskless. I had made money on the other four so there was no risk on leaving one open with the put options.

Please keep an eye on technology, biotech and health care. There is a lot of volatility there. We saw biotech up 1.4% on Wednesday and down 1.54% last night. Could the latest US employment figures and the Federal Reserve minute meetings open the door for more downside movement in the market? I’m looking for more downside movement, but trade what you see, not what you think. Use the opening 30 minutes to observe. The market does whatever it wants. We don’t tell the market what to do, it tells us!