The Wrap 5/16/11

{+++} It was a very odd day in the market today. The Nasdaq was getting crushed and the Russell 2000 wasn’t much better. The Russel actually looks like it is breaking the right shoulder of a head & shoulder pattern and that’s not bullish. The DOW & S&P fought the good fight but eventually acquiesced to the sell pressure later in the day.

We’ve all seen market corrections and pullbacks, but today’s action things seemed a bit different as some recent market leaders were taken to the woodshed. GOOG -$11, NFLX -$10, AMZN -$10 OPEN -$-6 and AAPL looks like it is breaking.

China, India and some parts of Europe are tightening and global growth will slow as a result. This sentiment is finding its way into the psyche of the market, you only have to look at commodities lately. The only folks not tightening is the U.S., although implied tightening is starting to grow roots because QE2 is winding down.

The materials (XLB) are broken and look lower to me, same goes for metals and mining (XME) and energy (XLE) and oil service (OIH). Many are looking for the financials to take a leadership position because of the yield curve? I am short financials and beg to differ with that line of thinking. Screw the yield curve, banks all have a broken business models.

We will see oversold¬† bounce rallies along the way, but I am now fairly bearish, which you haven’t heard me say in a very long time. Based on that, I am more inclined to short rallies than buy dips, although we will trade opportunistically. If you don’t bend, you break. Always keep an open mind.

Good traders reserve the right to change their minds. I changed my mind today on the OXY buy, it looked good at the time, but then energy was acting horribly and we got out even as I went to a sell. I was stopped on my OPEN short today too, but re-shorted it again as it violated support for the second time and as result, validated my original thought process. Never be afraid to admit a mistake and cut a loss. The market changes its mind, you must change too.

Money is looking for places to hide and usually it usually lands in U.S bonds, notes and food stocks. I have a few that may play well going forward if the market rolls over. All of these charts look good. I’m watching things closely and I will keep you posted. See the P&L for entries and stops for these stocks and also please review any other changes. Good luck.

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