{+++} I heard fifty different reasons why the market has been down; Fed tapering, Japan is getting hammered, interest rates going up, tepid economic date, the big jobs number on Friday to name some.
How about this? The market was just hyper overbought. That’s what it is and all it is. You can apply all the reasons above to rationalize and intellectualize, maybe it will make you feel better, but its no secret. Stuff just gets overbought sometimes. When you go as long as we did without more than a 1% correction, the market has to readjust. Now we are getting close to oversold. So relax, get some powder ready and soon we’ll get deeply long and tear the heart from the chest of the bear again.
Downside levels to watch (if we don’t gap up tomorrow), for the SPX : 1604, 1600, 1580,1575. If that goes, then 1540. The 1570-1580 level would be a sweet spot for me to get really long, but the market may not give it to me. We’ll have to be patient and just wait and see. There is a decent possibility that we churn and chop tomorrow as we wait for the jobs number on Friday.
Everyone was so bullish as recently as a week ago, so you have to think they will soon see these lower levels as a great place to step in. Maybe not tomorrow, but soon. It’s way more fun when stocks go up, so hopefully we can put in a short term bottom soon.
Keep in mind that I view the market as neither a bull or bear but as an agnostic, I just think we still go higher this year and next. There will be a time again to short and stay short, we’re just not there yet.
The last time the SPX tagged the 50 day moving average was in mid April. It was good support and the index rallied about 140 handles since.
Below is a look at the main ETF’s and where they are in terms of their moving average support.
XLF – (financials) closed 19.36 50 day at 18.91
XLV- (healthcare) closed at 47.37 and below 50 day
XLB- (materials) closed right on the 50 day
XLU- ( utilities) has broken all moving averages, closed today right at its 200 day moving average
XLK- (technology)broke 20 day today, 50 day is below
SMH- (semiconductors) broke 20 day today, 50 day below
XLI- (industrials )broke 20 day support today, 50 day below is fast approaching
XME- (metals and mining) has broken all moving averages, looks sick
IBB- (biotech) broke uptrend and 50 day today
Bottom line, stay patient, and trade smaller here.