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The indices broke today. In case you were away, I posted the main charts at the bottom of my post tonight tonight. So the bears had a decent day, the bulls sit back and laugh with a goblet of wine in one hand while waving a giant turkey leg in the other while having a muse rubs their bellies. They are fat and happy as the saying goes and are more than happy to sell some stock.
The market has been hit with some challenges the last two days. China growth is slowing (we knew this), and today, Europe came out with worse than expected numbers (what a surprise). The bottom line is that the market needed a reason to let some air out.
Every time I want to mortgage my life to go all in short, I think of how this market has been trading for quite a while now. They keep buying the dip. That will work until it doesn’t, and one day doesn’t a correction make.
So for now I covered a few things and stopped a few things and will watch and see if the bears have a big follow through day tomorrow. For the market to go lower, the bears need to press here. If the bulls take the baton tomorrow and run it higher, then today may be just one of those mini corrections and the baton goes back to the bulls.
The sign of a trend holding its place, is when it stays firm and only sells off for a day or three, so it’s still early to see what this market is up to. There is no doubt though, that we have started to crack. The question is how long do we trade lower.
My gut says that we still play this rotation game for a while, although today they threw the baby out the the bath water. I don’t like catching knives, and you old salts know that I never do, but some sectors are getting cheap. They could get cheaper, but may be ripe for oversold bounces.
Names like CLF and our old favorite WLT come to mind. No trades yet and I will let you know. Still scary.
PLEASE check the P&L tonight for adjustments and updates and I will be at it bright and early tomorrow morning.
Joe
