Another ugly day, or as we like to say “fugly” day on Wall Street as investors sold down stock. Small cap stocks lead the way down as the Russell 2000 closed down nearly 3%. The NASDAQ shed 2.65% while the S&P 500 closed below its 50 day moving average shed 2%. Volume leapt across the board well above average volume showing institutions were busy dumping stock on the market. Despite a few bright spots the market has come under HUGE fire as of late and leading stocks were telling the story.
Fear was back in vogue as the VIX jumped 10% fueled by fear over the ramifications of a debt deal. At this point, the two sides continue to remain FAR apart from a deal, but a deal is likely to come. One or both sides will flinch in the final hour, but the underpinnings of this market continue to appear weak. Very few stocks are holding up during this market sell off and continue to suffer major selling. While I’d love to believe we can continue higher after a debt deal is in place the leading stocks are simply NOT suggesting this possibility.
Adding fuel to the fire is the inability for the Russell 2000 and S&P 500 to hold onto their 50 day moving averages. Earlier in this month we did see the averages find support at this important moving average, but now we find ourselves with zero. It would take nothing short of a miracle to turn this might ship around and move into a new bull market.
This market is proving why it is ultra-important to maintain discipline in the market. If you had a cut loss strategy in place you would be avoiding the carnage we are experiencing in the market. Again, the selling we are seeing in our market leaders and the market overall is spelling out more than just a debt ceiling debacle. As of now, this market is on shaky, very shaky ground and it is wise to sit in cash. Our short scans haven’t definitely perked up again and we are actively searching for viable entries.
Remember, market corrections yield new leadership and new bull markets. No matter how long this lasts we’ll have another opportunity to make money off the long side of the market.
