Market pattern changes
Just when the day traders and over eager dip buyers figured out the pattern of buying weakness in 2007 works, the two-day pattern of reversals was broken...
The market opened under pressure, there was attempt at a to bounce, but when it failed market proceeded to a new low for the day. The rest of the session was a meander sideways as the SPX bounced along those lows.
The Russell Index was the weakest of the broad market indices, losing nearly two percent. For those following trendlines and moving averages this week it broke below the 50-day moving average and today's close marks the first violation of that trendline since August. Other indices show selling pressure.
The sector picture shows that selling was seen in most groups. As I said the oil stocks stabilised and was the only area to escape the pressure. Gold, small-caps, and transports were the hardest hit.Gold stocks should stabilise at this level and probable bounce. What is not yet out in news is that some large speculators must have taken a major hit in this move. Many were positioned for a different scenario in terms of at least sector moves and the action since beginning of year must have caused significant damage to those with wrong hypothesis or position. When the news becomes public, it might be good time to buy. There is an underlying bid in some select stocks and you should keep close watch on them. They are the ones not affected by this correction so far.
The most important thing is that much of this negativity should have an impact on sentiments. Too much optimism and hope needs to be snubbed for this market to move higher from this level. Remember this is still a correction in larger move. There is lot of chatter about this being "the top" but there have been many such tops along the way in last 4 years. So the better option is to keep flexible mind set. Some of my indicator are already moving in to bullish mode. Ideal scenario would be 2-3 days of selling to exhaust the selling.
Have a great weekend!
The market opened under pressure, there was attempt at a to bounce, but when it failed market proceeded to a new low for the day. The rest of the session was a meander sideways as the SPX bounced along those lows.
The Russell Index was the weakest of the broad market indices, losing nearly two percent. For those following trendlines and moving averages this week it broke below the 50-day moving average and today's close marks the first violation of that trendline since August. Other indices show selling pressure.
The sector picture shows that selling was seen in most groups. As I said the oil stocks stabilised and was the only area to escape the pressure. Gold, small-caps, and transports were the hardest hit.Gold stocks should stabilise at this level and probable bounce. What is not yet out in news is that some large speculators must have taken a major hit in this move. Many were positioned for a different scenario in terms of at least sector moves and the action since beginning of year must have caused significant damage to those with wrong hypothesis or position. When the news becomes public, it might be good time to buy. There is an underlying bid in some select stocks and you should keep close watch on them. They are the ones not affected by this correction so far.
The most important thing is that much of this negativity should have an impact on sentiments. Too much optimism and hope needs to be snubbed for this market to move higher from this level. Remember this is still a correction in larger move. There is lot of chatter about this being "the top" but there have been many such tops along the way in last 4 years. So the better option is to keep flexible mind set. Some of my indicator are already moving in to bullish mode. Ideal scenario would be 2-3 days of selling to exhaust the selling.
Have a great weekend!
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