Not worried...

Of course, when you cash out most of your holdings earlier today, you shouldn't be worried today, tomorrow...etc..    Yes, market got sold down today and breadth looked quite bad.    Asian stocks tanked and that wasn't helping the mood either.     However, if you look closely, most of the commodity stocks held up really well...till the last trading hour that is.    Well, when you have a down day like today, all of the market commentators will jump out and give us the speech why this is only the beginning and why we are that many points off from lows.     The fact of matter is that taking some profit in the month of May has been a normal practice for as long as we remember trading.    Those traders from old school are almost trained to believe the "sell in May and go away" theory and any potential selling can exaggerate the effect.     This also happens in conjunction with the Cisco report, which tells us that the earning season is coming to an end.    So, are we doomed for the next couple of months?    Hardly!

Before we start talking about market collapsing and nasty down moves, we have to be really rational on the whole "what if scenario"!    Technically, we aren't in horrible shape and as far as we can tell, we are still a bit off the support at Dow 12700 and SPX 1370.    In our opinion, even if those two levels get broken one day, it is still not enough to cause any real panic as we think the seasonality factor will slow things down dramatically.     What do we really hope to see the next couple of months?   We like to see lots of drifting.    This may very well happen as we may be stuck in a pretty wide(1000 pt) or so range without making a substantial move.     Of course, we are referring the drift to the overall market only.     On the other hand, the commodity market, is still the profit generating market for most traders.     In a way, we are glad that market is being sold off today as we are really uncomfortable chasing X at $170+ or POT at $200+ these days.     The collateral damage from this market will bring down the commodity plays and that's just inevitable.    To us, we view it as an opportunity.

The plan is simple for DJIM!    Since we haven't had a down 200 point day in a while, people will get some reality check the next couple of days and come back to their "senses".   We feel this market may remain under pressure for at least the next couple of days.    Hopefully, this can create some buying opportunity from the commodity sector.    We are in absolutely no rush to get back into any play in a hurry.    We just want to get back into plays in a comfortable fashion.     At this point, there's no advantage of deciding one commodity sector over another as they all seem to be very strong  with coal, oil, steel, shipper etc.

Bottom line, there's no need to be shocked by today's decline as it is just normal volatility.     Today's action may seem extreme, but if you just go back a couple of months, today would seem like "business as usual"!     If you haven't been doing enough to protect the profit, today may be a good day to act as a reminder.     Just remember, we can always buy stuff back if market proves us wrong.