....Liquidation day

One thing we should always remember and never take for granted in the future is what we discussed before Wednesday's open!.  "Negative reversals" .  Yep, they're not pretty and after the broad market sell -off of 3% today, we know once again you can't put a bag over something as ugly as Tuesday's action and trade happily ever after in the near term.  Not only was there not enough buyers to sustain a move to the upside early in the week, the chance of buyers coming in now would be nothing more than those looking for a quick oversold trade.  Since the sell -off involves so many negative factors, including ECB rule changes causing liquidation,  the thesis of not testing the July 15th lows is almost out the window.    It is incredible how quickly this market changes, how fast new headwinds can squash any potential upside.  Today, we had our "tech worrisome"  , come to a quick realization.  As you know the drop in Oil has changed the forecast for earnings for every stock related to energies.  One thing that hasn't been discussed is the same thing is going to happen to the GOOG's , AMZN, EBAY etc, because a strengthening, firming $USD dollar is going to do the same thing Oil is doing to energy names earnings.  Right now, the emphasis is on slowing economies abroad, nobody is talking about what FX is going to do to companies revenues, profitabilty models. Some giants realize 50% or more of their business outside of the U.S.   There are going to be earnings revisions all over the place as the USD continues it's run.  This will have minor effect on Q3, but we will start to hear guidance noise for Q4 and we all know nobody likes lowered guidance, FX related or not. 

The SPX tested the 1260 level 8 times recently and today it also busted through 1250, which was also a technical support level for many.  A sharp decline was inevitable as 1260 got knocked out and now we are looking at 7/15's intraday and closing levels of 1200 and 1215, respectively.  Friday is the Aug. jobs report and of course this added to the fuel of todays declines.  This report will carry the trade on Friday and if we see July's lows. The street consensus is 75k, a big downside to say 125k ( we think very possible) and you can say July's lows ..here we come!.    If we don't get a meaningful number, the prospect for a trade to the upside exists following an oversold thesis.  As we noted above, it would be just a quick oversold trade and carrying/ holding it into the weekend will not suit us.