An Intraday Sell-off Gets Bulls Uneasy as the Dollar Finds Support

Just another day in the magical land of stocks.  The market once again gapped higher only to meet a wave of selling then finding support.  Volume was lower across the board and even with the S&P 500 at new highs institutional players weren’t rushing into stocks.  Today was not an ideal day and demonstrates why getting overzealous of a suspect rally is unwise.  What we saw today is pricisely why I am looking for another follow through day to confirm the strength of this market.  A warning flag was raised today as we did see stocks sell off quickly mid-day and we should be defensive.

What caused the intraday sell off could have been the dollar rallying just before stocks began to sell off.  CNBC has made much of the correlation between the dollar and stocks that any rally/sell off in the dollar will move the market in either direction.  The dollar broke the 75 level early in the morning but saw a sharp rally causing traders to sell stock.  Whether or not it was a black box program or not stocks were sold sending a shockwave through Wall Street.

At some point, for me to get excited about this market is another follow-through day.  In the meantime, I am simply not going to stick my neck out in this market.  Tomorrow we have WMT reporting as well as weekly jobless claims.  Evidently the claims number is a hot item amongst Wall Street folk.  Today we saw the S&P500 stall somewhat, as the past two “tops” we saw high volume reversals.  Perhaps the lack of a high volume reversal is foreshadowing higher prices for the S&P 500.  It remains to be seen whether or not we move higher, but I am not going to move all my chips in without having that 2nd follow through day.

The Federal Reserve continues to print dollars at an amazing pace.  It is quite scary the amount of liquidity the Federal Reserve has pumped into the market.

Stay liquid and enjoy!