For the third straight session stocks slide lower in above average volume. At least the Russell 2000 did not lead the market to the downside. The NASDAQ lead the decline today with the Russell 2000 not to far behind. We still remain in a bad seasonality period, but there is light at the end of the tunnel in terms of seasonality. However, given we have QE ending the market will need to adjust to life without free liquidity. Right now we have a weak market and until we can see some extreme oversold conditions a bounce is not likely to come just yet. When we do turn Big Wave Trading will be all over the move. This market is still on shaky ground and it is best to be cautious awaiting the right time to get back aboard this market.
A curious thing about this market and action today was the lack of move in the VIX index. The volatility index closed well off its high of 17.55 closing at 16.71. Fear simply does not appear to be running rampant among option traders just yet. Sentiment readings from AAII and NAAIM will be interesting to see if the recent selling has changed their view of the market.
One thing that would be good for us is a swift market decline. When was the last time we had a correction of 10% or more? It has been quite some time and when the market resets it gives us the ability to find stocks with the ability to run more than just a mere 10 or 20%. You can only trade the market you are given and you will only make matters worse by trying to push for gains. While we would love for a larger decline it may just not happen. Trade what is in front of you not what you think or want to happen. It will only lead to loss of trading capital.
This market is on thin ice at the moment. Obey your exits and cut your losses short.
