So what happened you may ask? It was a confluence of several things. 1- We were probably extended and overbought 2- The AAPL hangover kicked in,meaning thanks for the great earnings, but where’s Steve Jobs?, 3- Goldman Sachs had a crappy number. 4- Housing prices fell. Keep in mind that the Dow Jones would have been in much worst shape if not for IBM and its solid performance. IBM has a big weighting in the DOW. IBM alone accounted for about 40 DOW points today, so you can do the math.
Technology had a decent start to the week, but got upended today and we took some profits and a few stops. The P&L has been fully updated so please review it. FFIV reported after the close and missed on earnings, last I checked the stock was down $25 in after market trading, as a result some other tech was lower as well in the post market. FFIV is a great example of why I try never to hold a stock through an earnings report. Sometimes I miss it, but its never intentional.
For quite a while the market has bought every dip, but they didn’t today, so that males me look twice and pay attention. I always say that charts look great until they don’t. Today there were some key reversals on the charts. Stocks like AAPL, VMW and certainly FFIV tomorrow will show cracks in the armor. The bulls will say it is just a correction, (just one day) they may be right, the bears will say this could be the start of a correction that could be much greater in depth and breadth. I am agnostic as always, and will just read the charts. If we do go lower, it may take a day or three for things to set up on the short side, conversely if dip buyers come back, we will evaluate that possibility as well.
I think the financials are done for now, GS, JPM, MS and WFC are out of the way and nothing impressed me. BAC reports tomorrow morning and I expect more of the same. With unemployment stuck in the mud and housing still in trouble, I just don’t see big upside for the financials from this point.Give me a catalyst and I’ll listen. If I am right, that will be a drag on the market.
So bottom line, it was an across the board sell off, no sectors were really spared and now we need to wait and watch for a bit. I am looking for shorts as I write, I already know where I want to go on the long side, but I don’t think the market will make it that easy. It’s still early to be 100% sure on the short side as patterns will need some time to set up.
Earnings season is a very volatile time to trade, so please use extra caution as momentum stocks are being punished here.
As always, I will let you know what I’m thinking.