Distribution strikes across the market today as prices fell more than 1% on the NASDAQ, S&P 500, and Russell 2000. Small cap stocks continue to take the brunt of the selling as noted yesterday’s commentary and today was no different. The Dow did lose triple digits closing the day down 129 points. For whatever the reason the market simply hasn’t been able to continue its rally. Today’s move puts us in neutral mode adding to our already established hedges. At this very moment, it appears the Santa Claus rally will be late this year. Will it come is another question. It is time to be act according to the price action of the market and we have moved into neutral mode.
The Dipsters out there will be out in full force as the “Just-Buy-The-Dip” slogan will be chanted across the financial media. We are oversold according to the McClellan Oscillator, but other indicators show we certainly could slide further. We will not and cannot predict the future and can only go on what we have in front of us. Price action amongst leading stocks and the overall market has moved us into a neutral position. The macro environment, the Fed’s Taper, or whether or not next year will see a surge in CapEx spending as no influence over our trading methodology. We certainly hope things improve, but we aren’t blind to the fact no human can predict the future.
A week from today we’ll get the Federal Reserves policy statement and it will likely contain we are not tapering. It is hard to imagine Big Ben starting the tapering process prior to his departure. How can anyone really know what they’ll do and more importantly how the market will react to the policy statement? What would happen if the Federal Reserve says Taper will likely begin in March will the market continue to go higher? It is really anyone’s guess and we aren’t about to worry about how the market will react to what. All we care about is the market will move and we’ll use our signals and process to trade. Otherwise, we’ll spin in circles getting dizzy and falling down.
So many were expecting this market to run hard into year-end with so many managers underperforming the general market. So far, this hasn’t panned out. It still could and if it does you can be sure we’ll be riding the wave higher. Stay with the program!
