About Shark Watch
Wednesday, July 9 - 4:41 PM
Although the action had been weak since late morning, the selling really accelerated late in the day, and the major indices gave back all of yesterday’s gains and more. Once again, the financials led the descent, and even the drop back to session lows for oil wasn’t able to help matters. All it did was sent both energy and materials into the red.
We’ve been mentioning that the oversold conditions have increased the chances that we would see some sort of oversold rally, but the lack of any real panicked selling hadn’t really set us up for the kind of counter-trend bounce we saw back in March and May. We mentioned yesterday that the fact we hadn’t had a really good washout meant that there were likely plenty of folks sitting on losses who would be ready to sell into any strength. Once it became obvious that yesterday’s rally wasn’t going to continue, a little profit-taking turned into a full-fledged reversal.
We’ll see if crude can continue to move lower and if that will pull some money back in. That said, this sort of dismal action is a real confidence killer, and even though we’re still oversold, it’s won’t be easy for investors to really trust any action to the upside.
The bottom line is the same one we’ve been reiterating for the past several months because it bears repeating. This market is in a downtrend and we can only stick to very quick trades if we want to do anything on the long-side. It’s going to take a lot of work and a whole bunch of patience before it’s safe to start building core positions.
Have a great evening and we will see you tomorrow.