The start of 2014 has been quite the opposite of 2013 whereby sellers are in control of the overall market. Just after noon eastern sellers jumped aboard and pushed the entire market lower. Volume ran higher than Friday’s pace as institutions jumped in and sold down stocks. Making matters worse was many stocks have been looking good were wacked pretty hard today. It is not the type of action associated with rising markets. Given the amount of reversals and heavy volume selling we are near correction mode. Hedges will be stepped up due to price action here and we’ll away for our individual stock exit and short signals. Obey your system and do not think only react to what the signals are instructing for you to do.
If we do end up in a prolonged decline here is not a surprise to us. Nothing really surprises us anymore, but given the level of bullish sentiment in the market a correction isn’t out of the question. We have yet to see this market drop more than 10% since 2011 so odds are increasing we will see one soon. By chance you hear anyone calling for an all out collapse of the market like 2008 is mostly like still living in 2008. Anything is possible I suppose, but you tend to get fair warning well ahead of any crash. Just look at the 2007 set in October of that year through August of 2008. A clear set of lower lows was well established. In any event, a small correction to start the year isn’t a bad thing nor is it an unexpected situation. We’ll simply execute our strategy.
There are some troubling signs in the market when you see moves in stocks like CELG and SBUX. Even TSLA now appears its rally attempt has failed and is looking to challenge its most recent lows set in November. Today’s volume wasn’t impressive, but price action is clear on TSLA and while it may be an innovative company it still can go down in price. Heck, look at NFLX and GMCR getting cut near 80% only to run back and set new all time highs. For now, we just see negative price action for the bulls.
The last thing you want to do here is panic and overreact to the situation. Stick to the system and execute it. If you long time leaders are giving off sell signals then sell. Do not ask questions or think just sell. You are not smarter than the market. Cut your losses!
