Stocks Will Drive For Five On September 10

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September 9, 2021

STOCKS – UPS, CSX, MRK, CAT

MACRO – SPY, QQQ, DJT

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The S&P 500 fell for the fourth day in a row and is down 93 basis points for the week, which is really nothing. The index has been overextended, so now we are just reverting to the other end of the bands. I still think we can fall to the lower Bollinger band around 4,400. There is, from a gamma perspective, some pretty solid support around 4,440, if that level breaks, it could get interesting, with no real gamma support again until 4,250. I noted this in a write-up I did for Spotgamma this week.

The level on the RSI to watch is at 42. That has been an extremely strong level of support for the RSI. To be honest, you don’t see a level on the RSI acting as support very often. The RSI is great for helping to determine the long-term trends, but this case happens to be strange. So I would think if 42 breaks, it is likely to be meaningful.

NASDAQ (QQQ)

The interesting thing about the Qs is that there is now a bearish divergence on the RSI, with the RSI making a lower high as the ETF is making a higher high. From what I can see, it doesn’t happen too often, February 2020, August 2018, May 2017, and July 2014 were the last time it happened. The July 2014 decline lead to a 10% decline in the ETF, while May 2017 lead to a 6% decline, August 2018 led to a 20% decline; I don’t have to tell you what happened in March 2020. So at the very least, this is something one must watch really closely.

Dow Jones Transport (DJT)

The transports look really bad, with the Dow Jones Transport average down 1% and back to the low end of its trading range. Some of the stocks suggests that the average has further to fall, and that is really concerning.

UPS (UPS)

UPS is one such stock and it looks really weak. It is on the cusp of breaking support and on its way back to filling the gap at $178.

CSX (CSX)

CSX could be working on forming a double top pattern. It will need to fall below $31 for confirmation.

Merck (MRK)

Merck has been hit really hard the past few days since Morgan Stanley downgraded the stock to equal-weight from overweight, and amid concerns over drug pricing. The drug pricing thing has been an issue for years already and nothing ever gets done, maybe this time it does, I don’t know. But the stock fell below the uptrend and filled the gap around $74. If the stock breaks $73, my thoughts of it rising to $81 may be toast.

Caterpillar (CAT)

Caterpillar is resting on support at $180, and I don’t think it will be too much longer until that support breaks and the stock heads to $180.

Have a good one

Mike

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