..Blame it on the Financials...

Today had all the markings of the past week and more of trading, except one thing!.   This weekend, … ”*We'd watch the financials closely, if they can no longer maintain strength this market will correct“.  This was the downside risk today, days end the SP financials were down ~5% causing a slice through important support 200 month MA.   Once this was more than a slip below all the levels we’ve discussed here 1018, 1016, 1013 recently,  it was an inevitable touchdown to SPX1.  There was no concrete catalyst for the financial swoon unless rumors of renewed credit concerns come to fruition.  In all reality, this group was up about 13% in August holding up the market, today was their time for profit taking.  This was especially true in 4 of the most speculative financial- linked stocks..AIG C FRE FNM. Basically, they started the mess and other financials followed suit.   So, this was the only difference in the markets temperament today, other than that, it once again chewed and spit out positive ECO' data from China and US.   We’ll see ISM hit 60 soon, today just being over 50 was not enough, maybe the market wanted a beat of consensus to mid 50’s.   Last week we were saying don’t put too much into up moves as profit taking will come in.   It did and than it got intertwined with the Financials that caused things to spiral out of control.   By close, this was one day where an underlying bid did not appear.  You can hardly blame such after all the technical damage done quickly.  

If you’re of the mindset of what could go wrong,  you’d be still stuck in March 2009.  If you had this renewed fear just hit you today, well, just stay out of the market.  On the other hand, we feel this is a textbook recovery and the path of less resistance is to the upside in the next 4 months.  All these positive ECo' data points that are being sold now will materialize into a much higher SPX level.  Let’s just call this sell good news and /or priced in news, a 'phase' the market is in late summer.  

Technically,  we’ll get support 975 Aug ES lows  to-980, this mark a 5 to 6% correction off the high in our books.   As you probably remember this has been the norm for corrections going back to March.  No reason to be bullish now unless we close over 1015.   Until, do what others are doing and that is take profits on any new positions you may start or old positions on any melt ups/ bounces.