This morning it looked like the market was going to follow the familiar script of a light-volume V-shaped bounce through resistance, but we had an unusual late-afternoon swoon. This market hasn't seen many of those, especially once these bounces start.
Market players have become so used to the standard rules of technical analysis not working very well that it is a bit surprising when we actually do have a failed bounce as we hit resistance.
After the late reversal today, the index charts, for those that care, which already looked pretty poor, are really a mess. The SPY, for example, failed almost exactly at the 50-day simple moving average and then finished down at the day. That looks like a classic low-volume bounce failure, and you have to be looking at the possibility that the big gap from Monday morning will be filled.
What is so tough about this market is that betting on failed bounces has been a horrible strategy for so long. It just has not worked well at all since this rally began back last March, so you have to be a bit hesitant to start thinking that this time it is different, but the action today is pointing at the conclusion.
In addition to the afternoon reversal, what really stood out in today's action was the strength in gold and silver mining stocks. GLD hit an all-time high, and the group stayed strong all day. The dollar was up, so this wasn't just a reaction to currencies. It looks like a flight to a safe harbor as uncertainty increases. For a while, the historical role of gold as the place to hide when economic problems are hitting has been forgotten, but it looks like it is being embraced now, and that may be a bad sign for equities.
The overall market does not look very healthy to me right now, and I'm maintaining my positions in what I consider to be two very undervalued stocks: C and AAPL. This market is becoming more chaotic lately, however, which means we need to make sure we stay very flexible.
long C; AAPL
Subscribe to:
Post Comments (Atom)
No comments:
Post a Comment