Friday’s trade had all the makings of a true test of SPX November lows investors had been eyeing. The markets tumbled at the open to a new intraday low of 734 and than steadily recovered, even to go green. The perfect scene was being played out on the heels of terrible market news (Citi/ Treasury swap, GDP revisions etc.) Unfortunately, as we always talk about, it’s the close that matters and their was nothing pretty about this one as we closed at new lows (SPX 735 lowest close since Dec ‘06).
Unless, we have some positive news over the weekend, we can’t imagine what that can possibly be, a follow through open to the downside is inevitable with such a close, plus all talk this weekend will be on 50%. Yep, almost to the dot, the DJIA has now lost 50% from October 2007 highs. A whole new bunch worries (incl. Healthcare -Obama- budget) are a blow to the psychology of the market and we could only sit back and hope for the market to play out the true test scenario early in the week.
The daily tape had selling 4 out of 5 days into the close, seemingly it’s a constant bull trap and buying any sign of a reversal will make traders think twice before getting in on one this week. Also, we are below the 750- 800 buying zone and so all bets are off until we get back there on a close.
Those jaw breaking declines in HCare took MED tech stocks with it, will watch names like STJ, BDX, ABT, MDT SYK for intraday bounce trades to the long side early in the week.