Market Finds Relief After Four-Day Sell-Off

US stock futures point to a higher open Tuesday following sharp losses to start the week. Political bickering once again weighed on stocks as the congressional super-committee was unable to come to an agreement on how to slash nearly $1.2 billion from the government deficit. A stale mate over the debt ceiling sent the markets tumbling in July, and this weekend’s impasse marks the second time Congress has triggered a sell-off in world markets.

Europe also remains in focus as officials remain at odds over how to tackle the mounting sovereign debt crisis. Spain saw its bond yields rise once again today in a short-term auction. European officials want the ECB to begin more aggressive bond purchases and create a more stable Euro-bond, but Germany opposes these measures. The continent’s leading economy feels that such actions could trigger inflation, saddle the ECB with bad loans, and expose itself to irresponsible spending from other Eurozone economies, which would have less incentive to reform economic policies.


It’s hard to be excited about the state of the world economy today. European bond yields going to historic highs, nation by nation. Previously unblemished sovereign debt ratings are being slashed, country by country. We have broken structural entitlement systems both here and abroad.

But that doesn’t mean we can be thankful for what we have. As traders, we are thankful that we have the tools to manage risk in these uncertain times, rather than simply park our money long-term into a market that is broken.

The market had a 15-17% move from the October 4th low of 1070 to the 1292 high on October 27. The market did this quickly and convincingly, never violating the 25% Fibonacci retracement zone!

The pull-back into the 38.2% retracement zone from the highs on November 1 was our first signal that things were beginning to change again. On November 16th, the market resolved a technical wedge pattern to the downside, officially putting us back into a market correction, per IBD.

We have seen 4 straight days of heavy selling, and now it’s time to see whether we can put in another short term bottom. Yesterday, the market held the 1183 level, which is the 50% retracement zone from highs. What does this tell us? It tells us that the bulls should not give up, but we are in a little bit of no-man’s land. I believe we will have a slow, thin tape for the rest of the year, barring any monumental headlines out of Europe.

Most importantly, this week be thankful for the little things. Things are tough out there, appreciate what you have. Enjoy your family! My Grandma used to say, if a check can solve your problems, you don’t have that many problems.

Disclosures: Scott Redler is long SPY

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About Scott Redler 367 Articles

Scott Redler is the Chief Strategic Officer of T3 Live. He develops all trading strategies for the service and acts as the face of T3 Live. Mr. Redler focuses on thorough preparation and discipline as a trader.

Mr. Redler has been trading equities for more than 10 years and has more recently received widespread recognition from the financial community for his insightful, pragmatic approach. He began his career as a broker and venture capitalist where he was able to facilitate relationships that led him into trading. Beginning his trading career at Broadway Trading in 1999, Mr. Redler moved on with Marc Sperling to Sperling Enterprises, LLC after establishing himself as one of the best young traders in the firm. As a manager at Sperling Enterprises, continued to trade actively while working closely with all traders in the firm to dramatically increase performance.

Mr. Redler has participated in more than 30 triathlons and one IronMan, exhibiting a work ethic that also defines his trading. His vast knowledge and meticulous attention to detail has led to regular appearances on CNBC, Fox Business, Bloomberg, and he is a regular contributor to Minyanville and Forbes’ Intelligent Investing blog. He has been quoted in the Wall Street Journal and Investor's Business Daily, among other publications.

Scott received a B.B.A. in Marketing/Finance from the State University of New York at Albany, graduating Magna Cum Laude from Albany's School of Business.

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