While I am happy to be directionally correct on this selloff, I will admit this is one of those times that talking about the trade/direction of the market has been much easier then executing trades on it would have been. While we are once again at lows of the move (lows which I DO NOT expect to hold), the constant late day rallies have caused havoc, and made any tight stop loss strategies difficult to work with. Yesterday’s rally – during the majority of the day, AFTER a gap down, was an example – as it made no sense. So while on the surface this has been finally been a victory for bears, it has been like riding a bucking bronco …. especially when the rallies have come for no apparent reason and on little volume.
Again, as I said a week or two ago, if we broke the 50 day moving average support the problem for bulls is there is no real secondary support for a long while. That is a condition of a market that effectively (aside from a 3 week break in November) went straight up for 6 months…. along with a short base that threw in the towel a few months ago. The 200 day moving average is the next big time support level – if we get there, I’d be interested in going long for a trade.
Ironically the retail investor had just come back into the market per the inflow data about 6-7 weeks ago… just in time to be greeted with a slap to the face.