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Today's Ugliness Is the Good News
By Rev Shark
7/2/2008 4:38 PM EDT
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The good news is that it doesn't get much uglier than this. Although the indices took a pretty good hit, they did not reflect the true extent of the damage today. There was some absolute carnage in the groups that have been leading the market for most of the year. Momentum never dies a pretty death, and today was a great example. Steel, metal, mining, agriculture, bulk shipping, solar energy, coal, etc., were absolutely pummeled. Even oil stocks took a pretty good hit while crude oil was trading strongly higher to an all-time high.
This sudden reversal in momentum names, coupled with the over-anxious and premature bottom calling Tuesday, made for some real pain if you hadn't already adopted a defensive approach. However, as I've written several times lately, we really need the hot momentum groups to reverse like this in order to produce a good tradable low.
It's been too easy to find a place to hide in this market, and that has prevented a real washout. The action today left almost nothing unscathed, and that is what ultimately leads to the type of negative sentiment that produces at least an oversold bounce.
Once again, I remind you that the trend is down, and trends have a tendency to last longer than you think they will. However, this is getting quite extreme now, and some relief is likely to come soon. Unfortunately, it is likely to be only a temporary respite.
Don't forget we have a half day of trading tomorrow. The market closes at 1 p.m. EDT. I'll see you tomorrow.