Sunday, October 23rd, 2016

Welcome to the first sell-off


Have not seen a sell program that strikes at 12 noon or 3:00 PM all this year. I was wondering what happened to those good old fashioned sell offs? Those ugly candles and red on the screen. When the dust settles all is well and we are back at the buying table.

The market clearly sold off right from the bounce we saw on Friday and the selling intensified towards the close. SPX hit the lowest point before time ran out and the bell stopped the sell program. What I have seen with this kind of selling, it usually follows through next day. SPX closed at the lows of the day at 1487 and that is just few points shy of the 50 day moving average sitting at 1477 which is most likely our next stop. We just have to see if the 50 day moving average will hold or not and we have another leg down. If the support is broken there is some more support at the Fibonnaci levels as we go down, and you can see that from this video.

Most of the banks and homebuilders sold off early and it was this weakness that lead to further declines rapidly towards the close. XLF and XHB were both down with GS leading the charge based on Italian election and Sequester concerns. Since the earnings season is over the attention is now focused on the economy and Europe and even Italian elections as if they really change anything what we do here in the US. It is the tail wagging the dog story.

The real reason for this sell off is simple: Profit taking after 7 weeks of upside action and not having a safe entry in the very overbought market that was making bulls very nervous. The market has dazzled longs for a while now and also frustrated the bears at the same time. Now perhaps both of them have their wish and they can handle that. The sequester concerns will bring some monetray cuts but will they fade the US economy and the well being? Perhaps not, and as you know something will get arranged at the last minute at the last hour in Washington DC after all.

We have been very nimble and we dont have many positions at hand, and that is because of our Technical know how and hands on appraoch to the markets. It has worked in the past and still today. Sometime we do fail just like others. But that is life.

For now we will keep an eye on the market and when the time is right, we will get back in.

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