The Machines Won Today....

To say the action was volatile today would be a bit of an understatement. We started off weak as the dip-buyers just couldn't manage to get much going. They finally produced a small bounce as we hit S&P 500 resistance at 1150, but that move was flipped to death, and we broke back under that point.

Scenes of rioting in Greece were being shown, and market players were starting to look panicky. Then what looked like a large computer-driven trade hit, and we went into free fall and were down almost 1,000 Dow points before bouncing back. No one is exactly sure what happened, but I would be very surprised if it wasn't a computer-driven program that ran amok. There is just no way the individual trades were being executed at that pace. Only computers can move that fast. In fact, many traders were shut out of the action as their screens froze.

I'm sure we are going to hear quite a bit about what caused the big swing, and it did quite a bit of damage. The biggest problem is that undermines confidence in the markets. How can anyone invest rationally when we have such huge random swings?

Already I'm hearing companies like PG and C say that there was no evidence of "bad trades." I think they are right. The trades were legitimate trades made by computers to act in a certain way. The computers just overran the humans. What individual investor will want to risk his precious capital to that sort of manipulation?

Our more immediate concern is how to deal with this market. The action today is going to push a lot of folks to the sidelines, but the good news is that volatility is likely to stay high for a while, and that will provide opportunities to those who can move fast.

The action today really messes up the charts, but any way you look at them, we are now in a downtrend. Volume was huge, breadth was horrible, and there isn't any good technical support. We may see some countertrend bounces, but this is a market that has a high risk of further downside in the near term, so beware. I'm extremely confident AAPL is worth much more than $240 to $250, so that's where I am right now.

long AAPL