The market appears to be oversold to the slick-talking pros and, while there is the chance of a rebound, the technical picture continues to worsen.
One sector I will be watching this week is transportation, as it will likely hold the early clue on a bullish rebound or a breakdown to lower lows. The Dow Jones Transportation Average (INDEXDJX:DJT) has been holding support at 8,000-7,975 and the 50-day moving average since mid-September. The major moving averages are in a nice uptrend, with near-term resistance at 8,100-8,150. A close above the latter would be a very bullish development and could help turn around the Dow’s fortunes. A close below 7,950-7,900 would be a bearish development and would represent a major move out of the current five-week trading range.
By comparison, the technical setup for United Parcel Service, Inc. (NYSE:UPS) looks bearish, with the 50-day moving average on the verge of falling below the 100-day moving average. Near-term support is at $106, with risk to $105–$104 and the 200-day moving average on a close below this level. Resistance is at $108–$108.50.
The UPS put options are reasonably priced for possible bearish trades. For example, the UPS November 105 puts (UPS161118P00105000) are “cheap” and could be targeted by bearish traders on continued weakness. However, shares will need to fall below $103.75, technically, by Nov. 18 for the trade to break even.
The UPS December 105 puts (UPS161216P00105000) would give a bearish trade another month of time premium and a breakeven point of $102.90. A double would occur if UPS shares fall below $100.80, technically, by mid-December.