There was a ton of optimism heading into this week with the market potentially putting in a short-term bottom. We had plenty of traders make no bones about it on social media declaring they have picked a bottom. Unfortunately for them, sellers hit the market today sending stocks lower with the Russell 2000 down more than 2% on the session. Last Wednesday could have been a bottom, but this market hasn’t confirmed a new rally just yet. Today’s session with crude oil falling back below $30 sent overzealous oil longs to bail as the S&P 500 energy sector was the worst performing sector down 4.52%. At the end of the day we still are not in a market environment where longs have a high rate of success. Do not try and be a hero like our social media brethren.
A positive on the session was certainly having volume come in lower than Friday’s level. Monday’s hardly ever have volume nowadays. An ideal situation for today would have been a small loss inside Friday’s bar. A quiet day of consolidation prior to a day 4 confirmation of a rally would have been preferred over today’s action. There isn’t much we can do as we are not going to force trades to fulfill an emotional need. The market is not favoring longs at the moment and so we wait for the proper time to strike.
On Wednesday we are going to see another rate decision by the Federal Reserve. Everyone thought the rate hike would go unnoticed by the equity markets. Not a chance. If we had to guess the tone we’d say it is likely going to be VERY dovish. They will likely try to come out and calm fears over a possible recession and of course talk people off the ledge due to this market decline. Remember, the SPX is down roughly 8% YTD and the NASDAQ is down almost 10% YTD. Not the type of numbers the average investor wants to hear. Not to mention all those who are retiring. In the end, we boil it down to price action alone. Yes, we simplify it and where most simply guess using a theory we used a fact based approach. No need to be Nostradamus. Follow price.
Tomorrow will mark day 4 of an attempted rally. It does not feel like any confirmation will be successful, but it’s not about how we feel. We will continue to stick with price and move forward with the market.
