By looking at the final box score, you'd led to believe that market didn't behave so bad given the potential carnage caused by Intel. On the contrary, we think this market missed an opportunity today to mark a tradable short term bottom. Yes, the rational thing would be for this market to get sold off hard on the Intel news. Ideally, we'd be sold off hard enough to cause some panic and a meaningful and powerful reversal ensues to mark a low point short term. The morning had more momo stocks down 10% than we've seen in recent memory. A bunch of them from every sector we have followed. This was a golden opportunity for more panic to set in!. What a bummer it turned out to be!...What we think happened today, however, is some brutal action that tricks(sucks) more people into the market thinking it's a bottom. If we had another half hour to trade, this market would for sure close down triple digits again.
The financial group rallied today and normally we'd cheer for it. But lately, cheering for financial group has been nothing but costly for investors who'd believe the group would lead us into a rally. We think a combination of over sold covering, anticipation of a surprise Fed rate cut and some rotation from tech sparked the rally in financials. Unfortunately, this kind of speculation is so short lived and we just can't trust it any more. As a matter of fact, financials didn't help any other sectors today. We had chemicals/agriculture group try doing another day of heavy selling. Yes, we want this!...last week noted....."We need to see consistent action in the growth stocks, if some are still taking a fresh beating you have to ask which might be next?. This is something we fear that a hot group like the Ag-Chemical shoe is yet to fall". This was a start as many were down 10% plus to go with the another 10% plus down from the solars early on. If solars can do it 2 days straight, we'll take the Ag's doing a trip down...slowly or getting it over with quick and deadly drop. That is really the last group of strong momentum stocks that have been broken during the last couple of days and realistically it should be as every other momo group to get us to real reversal potential. Right now, cash is the king.
At the beginning of the week, our thesis was that companies like Citi and Intel might help to stabilize this market. By middle of the week so far, we know neither one is helping and they are actually helping on the opposite(down) side. We as traders just have to be flexible to decipher events like these and do what we considered as the right thing. We are saying "no thanks" to the dip buying at this moment because technical signs are showing more downside in the near term. Perhaps, the best thing for this market right now is for everyone to agree things are bad and sell off to a level we can work with.
Bottom line, if there's no panic, then there's no dip buying from us. We are preserving our capital and will monitor the events closer than ever. When the sentiment does get to be extremely negative, a tradable bottom will be near. At this point, it's not quite there and we just have to patiently wait. Unfortunately, we are running out of potential market bad news to this. INTC was a perfect catalyst, instead we got a half ass rebound again that was sold off into the close. If this flush doesn't happen soon, we are stuck with this market dripping and dripping down with false daily moves. This is excruciatingly painful and before you know, you are at wiped out in more than one way and you know what we mean!.