One day does not make a trend. The S&P posted a 5-point loss on Tuesday, 1 point on Wednesday and 36 points today. Today is the only day that counts. There have been other one day drops this year on March 21st (-29) and May 17th (-43) and neither decline saw the market continue to drop. The May rebound was immediate and the March period saw some volatility for a couple weeks but no meaningful declines. What should we expect this time?
The market is much more over overbought this time and we are entering into the normally weak Aug/Sep period. In theory, the market should continue lower but there is so much pent up demand from investors waiting on a buying opportunity that dip buyers could appear at any time. In a normal environment, I would be tempted to nibble on some positions today but this is not normal. With the geopolitical headlines surrounding North Korea and an impulsive and non-political president, there could be a show of military force at any moment. We know he is a counter puncher and Kim Jong-un knows he is getting under Trump's skin. This is a dangerous situation.
For that reason, investors probably do not want to be adding longs ahead of the weekend in a traditionally weak period. Of course, I could be wrong. We could see a dead cat bounce at the open on Friday and then another bout of selling.
I do not see any reason to be adding risk ahead of the weekend. There is a strong opportunity for heightened volatility. There is always time to enter new trades as long as you have cash in your account.
NEW BULLISH Plays
No New Bullish Plays
NEW BEARISH Plays
No New Bearish Plays