Once again sellers had their way for much of the day pushing stocks lower for the fifth straight session. Volume was up across the board as institutions appeared to be dumping stock. Economic data continues to disappoint as expectations are being missed. However, the focus continues to be on the fall of energy prices and the blowback continues to spread throughout. Russia is the focal point, but the contagion could be vast. After two o’clock eastern buyers did begin to show up pushing stocks well off their lows. Unfortunately for the Twitter geniuses who picked a bottom they were hit hard in the final thirty minutes. The high volume selling has put this market in very dangerous position and playing good defense is your best course of action.
We are certainly seeing a lot of dip buyers are coming out of the wood work here. December lows are an easy spot for a bounce and easy set a stop there. Volume has been favoring the downside for quite some time. Upside volume simply is not there anymore. For much of this uptrend since the 2009 lows up volume really has been pushed aside. Dip buyers are a cocky bunch. For us, we simply follow our process. There is no need to let ego get in the way of our process. It clouds your judgment and drains your karma bank. The process is simple: cut your losses and ride your winners.
Unfortunately, small caps were the bore the brunt of the selling today. IWM was down 1.73% on the session while the QQQ was down 1.33%. Small caps had run hard after the December lows and was leading the rally. Given how IWM reacted today and over the past few sessions it is quite disappointing. It would have been nice to see outperformance from the group setting up a potential run. Now, the index sits just above its December lows like the S&P 500 and NASDAQ. It will be interesting to see how the market reacts at these levels.
We are near short-term oversold levels and a bounce here is not out of the question. Today’s move off the lows got the dippers excited. You can only imagine what a small bounce would do to sentiment. Stick with the program.
