Seems every morning the bulls have a glimpse of hope as either the futures indicate a good opening and/or we get a move higher early on. Unfortunately, any hope is soon relieved and the indices start to sink sooner than later. This is being repeated over and over again and all it does is make the bulls lose confidence. This makes it easy for the Bears. Considering we follow the small caps one thing we watch carefully is the IWM, yesterday the high of the day came at Fridays gap down high and there was no follow through higher. The next obvious step was to start looking at IWM's lows (low 71's) and if it was threatened it would break lower and it did to 70. Considering the beating of growth stocks Monday masking the indices action as we noted, there is/was no belief we could have gone higher. It makes no sense that we would with what is going on the day before in our favorite plays in '07. All that was happening was these stocks were having bounces off a terrible day and were nothing but sucker bets at this point. What you have to do is look around at what is still happening and that is a domino effect was in progress as more growth stocks were getting slaughtered. If the bounce in the JASO's of the world was a beginning of a rally, why were stocks like ISRG, CMG still getting hammered?. 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. If MOS blows guidance today, we might just get this happening today. Considering there is plenty of institutional money in this sector with many of the stocks over $100, it would be pretty ugly if MOS gives any signs of a slowdown. If they give a rosy outlook and don't move higher and/ or give up premarket gains later in day that would also be a bad sign for the sector. Wouldn't you want to take money off the table if you were given a gap up in this market with one of your stocks?. We only have to look at yesterdays words from AT&T that hit the market to understand what a negative word company related can do to the rest of the market. It doesn't take much and in reality its nothing we haven't expected. It's just the market is incredibly sensitive as of Friday.
Simply, it is easy to get suckered in now, especially if you are frustrated sitting on your hands. Just do it though until a clear trend change occurs. So we repeat..we have to wait this out!. What this market needs is to pull a ' Hillary' Clinton and cry a bit to pull off a comeback it seems, in the markets case this is called panic selling. A sob job!
*As earnings kick off what is essential is to not look at the headline number for the Q 'only' and jump in, but wait and see or hear the guidance. This is about looking forward now!