By looking at the final boxscore, you'd conclude that today was an extremely bad day, opposite image of Friday's action. Well, that is just on the surface. Sure, this action was very broad based, all sectors were down at least 1% and 95% of the SPX stocks were down, but volume was the lightest of the year and therefore inconclusive. Over the weekend, there was really no earth shattering event/ news which can contribute to today's loss. If anything, it is the tenuous Russia-Georgia relations and the related risk, including a collision course with Western nations that played a role. At DJIM, we stopped the blaming game a while ago because there's always something familiar which you can point your finger to. As time goes on, the blame game does get old, no matter what it is.
So can we totally ignore today's action?. Yesterday, we noted the potential resistance and army of shorts waiting on the retracement to the rising July-August trendline lows, it definitely seemed like this technical angle played out.. Also, an area which has stood out from the pack during the last few weeks is the technology laden group, NDX! Based on today's heavier than Friday's volume action, it does look like NDX is on the verge of breaking down the recent support. While we haven't been really playing much of the technology stocks to begin with, we still have to be prepared for psychological impact if this group gets taken down in any meaningful way. Eventually, there may be nowhere to hide other than a few biotech issues. Imagine the fun in that!
Right now, everything seems vulnerable, we seriously need to take that into consideration with any play selection and strategy. Crude oil isn't as invincible as it was for most of the year. Now we have the USD to deal with, it makes the whole oil/inflation thing that much more trickier. Basically, there's a lot of issues and uncertainties at this particular time of the year. To top it off, this is an election year and thing's are exactly crystal clear in that race either.
Is there any encouraging action out there? The only thing that looked a little encouraging for us today is AFAM and a couple of Shale stocks, but that's like throwing a dart into pages of stocks symbols and hitting something green in a market filled with terrible breadth. Also, what looked encouraging today can look like a total joke tomorrow. We are simply pointing out the obvious.
The bottom line, this market is very tough to trade these days and the last thing you want to do is to pressure yourself into a trading machine to seek an unrealistic trading edge.