Weakness Spreads as Buyers Stand Aside

Earnings season has been a rough time for stocks and Tuesday’s session was another reminder expectations remain too high.  The market got a big hit from an unexpected fall in Consumer Confidence with a reading below 50.  It was the first time since July the reading dropped below the 50 level.  Piling on was a lower reading from the Richmond Fed Index, this was all stocks needed to head lower.  A short burst of support helped the market but buyers simply lost interest and stocks continued to slide lower into the close.

We have a market where buyers have zero interest in stepping up to suppor this market.  Our major indexes are still above their respective 50dma and may be a likely area of support.  At this point, the market appears it has enough steam to plow right through support, but until we get there it is all speculation.  The sideline is a great place until we get some clarity with this market.

There are plenty of stocks who are rolling over and you can certainly take advantage of the situation.  In our chat room we have discussed a few today, but remember we are somewhat “oversold” and we could see a bounce.  Some of these stocks look like they won’t see support until their 50dma so it’ll be a wise move to take profits quickly as they might evaporate as fast as they appear.

It is possible we might rebound here, but we don’t have strong long setups.  There a few stocks that have gapped higher from earnings and have held their gaps so far.  However, these are premature setups and haven’t formed any bases yet.  Sitting in cash waiting to see what the market gives is a good approach here.  If you have a strong cost basis in a stock you have afforded youself wiggle room, but if you were buying while a stock was extended you have no such wiggle room.

We have definitely seen plenty of Chinese ADRs take a major blow.  On Monday we saw disappointments from our Chinese leaders.  Perhaps we aren’t seeing the expected growth from China everyone thought we would.  The action today in these names as well as other Chinese stocks showed there might be something brewing in China.  We still have earnings to be released from more Chinese companies, but so far things aren’t looking too great.

Perhaps we get a good orderly correction or not, but anything is possible.  The market is influx and we like to take it one stock at a time and go from there.