Rough Patch

Consider the phase we are going through now and next little while as a "rough patch" or even the May correction we were talking here last month.   Today’s breakdown to 1156 taking out the last support at 1170 and not closing above  it pretty well confirms we are in a May correction.    Mayday Mayday is the distress signal from Europe that has put the market in this unstable position.   Add, the China curbs creating a possible slowdown in many eyes and we're likely due for a rocky month.   Any push higher/bounce now and we are looking at "S"upport at 1180/1185 now being "R"esistance.   Of course, the surge of USD and Euro bloodbath is just putting any sort of major reversal attempt out the window until we find a tradable short term bottom.   Even a great NFP# on Friday might be a negative event as it would likely strengthen the USD.

So here we are, the sort of pullback we've all been waiting for.    Honestly, this may be the best time to get a pullback right before the summer rolls around.    After all, we've come a long way since just three months ago and this market has a right to take a breath and price in many macro issues.     What we do not want to see, at this point, is for this market to get out of control as far as the selling goes.    Things can escalate in Europe and this may be a catalyst to give some more people a reason to reduce exposure.    At this point, we can speculate all we want, but we still have to bite our time to let it play itself out.

Technically, the next important of support is 1150 and we may have a range between 1150 and 1200 to play with for the next couple of months, until one of the level gets broken that is.    So far, we aren't in a rush to get anything because many plays just look like they aren't ready to settle down yet.  Any new buys will likely have a very short term lifeline for us (24-48 hrs at this time).  It`s a short term traders market as we are not seeing dip buyers of significance these last 2 days.

Bottom line, earning season is still going as we speak but it's quieting down considerably and is taking a backseat to all macro issues.   The market focus is definitely not on earning reports anymore, so we have to pay more attention to other headlines that can potentially impact investors' sentiment.   Still, as far as individual mid-small cap plays,  we still expect good initial reactions to reports to trade.