Emerging from the Morning Fog

The first order of business for us, inside Market Chess Subscription Services, was taking advantage of this morning's weakness. As we discussed yesterday, sentiment seems to be rather subdued on this market pullback, with many assuming automatic support levels would hold and that the market had definitely bottomed since late-September despite very narrow leadership. 

Into the weakness, we took off the rest of a Russell 2000 Index small cap short, based on the 30-minute chart we had been tracking earlier in the week. Into weak IWM (ETF for the Russell) bounces, a reentry is certainly possible, with the TWM or TZA bearish leveraged ETFs.

In addition, we scaled half of a short in the growth leader, Under Armour, based on the head and shoulders topping thesis after a steep multi-year uptrend. Into the initial plunge below the "neckline," seen in light blue on the daily chart, below, we took partial profits for the sake of discipline, but still would expect more downside soon. 

Finally, crude oil continues to swoon, defying the many bottom-callers in the energy complex and punishing trapped longs from above. Despite the move in crude, retail stocks (FOSL JWN, e.g.) continue to weaken or get slaughtered, pointing towards deflation and undermining the notion of a consumer benefit from cheaper crude.