Yesterday afternoon’s sell-off was almost a repeat of the action we saw Monday, but much worse in my opinion because they were actually trying to rally…..In both instances the market was in a holding pattern until highly influential men were going to speak…..and in both instances the market was disappointed……we have clearly gone from a glass half full to half empty scenario as it relates to market sentiment……it is a show me story now, and it appears the fed lacks the ammo and the political will to QE the equity markets back up…..and truthfully that would be a very bad thing in my opinion….
If the economy is slowing after almost 1.5 years of expansion, and the previous stimulus and easing wasn’t enough to meaningfully lower unemployment and stop home prices from declining then I am not sure what will at this point other than one thing that it appears the feds don’t have a lot of; time and patience…….
Now back to the markets….I have been saying for sometime that the SPX will head back to 1250, and at this rate we will be there within a week……the big question I guess is what do we do when we get there? When we got there in Feb it was a slight panic following the disaster in Japan and we quickly recovered to make new 52 week highs in less than 2 months…..I don’t think this will happen again because of the mounting issues facing our economy, the prospects for global growth and the worsening geo-political situation abroad (that gets little play in this months news cycle) and the almost toxic political environment here in the U.S. I think we see 1200 in the SPX this summer and I wouldn’t rule out some flash crashy action at some point….the sell-offs have been all too orderly and I am hard pressed to believe that mutual funds don’t have their fingers on the triggers…..Hedge Funds have been positioned for this sort of action (well maybe not Jon Paulson’s) but true long/short funds……
On Quick Hits intra-day I have been focused on some high-fliers like AMZN, NFLX, Chinese Internet names SINA, NTES, BIDU as I believe that their price action is very indicative of things to come….their relative strength (or lack there of) shows me what the fast money is doing and usually portends things to come……on the flip side, banks stocks are getting very oversold and I am keep a close eye on them as a meaningful panic bottom with a reversal could signal the same for the market…..Yesterday morning I highlighted the potential for a sell-off in WYNN merely because the reasons it is in the stratosphere could quickly come undone and that as a high-flier I have to think this was a name that a holder with some sanity would agree and take some profits…..well when the stock broker 140 it really broke and I would expect this to continue at-least to $130 where it will pause, and then a move to 120…..
As for today, they will try to rally them at some point and be mind-full of the potential for a snap back rally when the market feels very oversold…..don’t be afraid to take some profits in some shorts (I am constantly trading around core positions in an effort to leave some ammo…). I am staying short until 1250 and will take another look at the thesis when we get there……at that point I would love to see quick rally to lay out some shorts as I think the end of q2 and early July should bring their share of earnings pre-announcements, and if not then then q3 guidance will clearly disappoint….