After going virtually straight up for weeks, the market was well set up for a sell-the-news reaction to first-quarter earnings reports, but news that GS was being charged with fraud finally produced a selling catalyst. Many market players were looking for INTC's report to be a selling catalyst, but instead it turned out to be the spark for a final flurry of frothy bullishness.
The market already looked like it was inclined to sell off as decent reports from GOOG, GE and BAC were sold this morning, but just as the dip-buyers started to do their thing once again, the Goldman news hit, and there was a rush for the exits.
There was quite a bit of talk about the SEC's case against Goldman being weak, but this was a market ready to correct, and it was a great excuse. The big question now is whether we'll gain some downside momentum. We have made such a big move and have had such little consolidation that there isn't a lot of good underlying support. However, the biggest positive that the bulls have going is that the focus is going to quickly shift back to big earnings reports from the likes of AAPL, IBM and even GS.
The dip-buyers were scared away today by this Goldman news surprise, but I don't expect them to disappear that quickly or easily, especially as they focus on earnings reports once again.
If you were holding too many longs you probably suffered some pain today, but the good news is that this spike in volatility should give us more interesting trade opportunities next week. Good entry points were becoming almost impossible to find, so today's action helps in that regard.
I continue to feel that it is very unlikely that the market is going to suddenly collapse. At worst, I'm looking for choppier action over the next week or two, which actually will be a refreshing change from the complacent, one-way action we had for so long.....