Talk of correction picked up late in the week. The question is will it be a standalone technical correction for the right reason (consolidation) or will it be accompanied by ‘ bad news’. This will determine the scope of the downside…shallow or deep. In other words,consolidation or correction?. The pick up in correction noise stems from something DJIM has been noting since Jan 7th..”RUT of a day’.. Wary- the ‘big’ underperformance today of the “RUT”, which had been the leader during December’s grind higher… the RUT has now lagged the SPX for consecutive weeks and could be foreshadowing ‘tiredness’ for the rest of the market..(Jan10th )…and before Friday’s trade…”You could see this by the RUT underperformance( down 1% to the SPX.). Friday’s trade gave this market fault more life.
In reality, the market is still in the same place today‘ inside the 20’ having just tested the 20ma and now sits only a few points over 1280 as “RUT” talk generates interest. On Friday, Briefingcom was really touting this point…(click chart on site) . Simply the underperformance point is gaining heavy exposure amongst traders and should be monitored closely.
http://www.djimstocks.com/storage/thumbnails/Rut_underperformance.png
All in, China expanding tightening policies, a hawkish Europe, a technical negative bias and the broad market is simply signalling it’s tired and overbought. We’d welcome a correction and in the meantime concentrate on fresh earnings to trade as in selective stock picking instead of being exposed to holdings in number or size.
