From the Trading Desk

Friday Morning Coffee: Stocks Fall Hard; Red Flags Fly

It was bound to happen as stocks made their way higher into new all-time high territory sellers would come in and hit stocks. We have seen this happen before in May and in June. This time, seasonality is on the side of sellers and with roughly two months left of weak seasonality this may not be the end of the selling. Of course, we could see this thing turn around like we did earlier this year. However, there are no guarantees in this market. We have moved in SELL MODE which does not mean we run for the hills. Operations in speculative longs will cease, laggards cut, and new longs will only be let through if they meet the highest of our standards. There is a possibility of further downside if this keeps up and we do not want to be long this market if it does.

At this point if we got a normal correction it would be a fabulous event for us. While we are not going to count on a real correction happening it would just help with setting up powerful charts. Given the nature of reserve banks worldwide and their involvement in capital markets we are not likely to see “normal” any time soon. We have adapted and you must to if you expect to extract gains from this market.

Valuations are still high and with headlines talking about how North Korea is going send a bomb over to Guam. No one person can be 100% certain this would be the case. However, the moment a missile is launch and set to head towards Guam what happens to North Korea? Mutually Assured Destruction will likely keep anyone from acting out of line. Keep in mind, the markets may still fall further and it may have nothing to do with North Korea. Perhaps, it is valuations and lack of volatility that will ultimately be the demise of this uptrend. At any rate, we can only worry about our actions rather than others. The market will go about its business waiting to chew and spit us out.

We hope you have a wonderful weekend! Get out there and enjoy one of the last few weekends of the summer left.

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