Pundits are blaming today’s move on a disappointing manufacturing piece of data out of China last night. China’s PMI dropped below the 50 level marking a contraction in manufacturing when the sector was expected to expand. Selling started early and Chinese related names lead the market lower. Just before 2pm EST the market appeared to be headed for much lower lows, but buyers were able to stem the bleeding. The pain was clearly felt in the Chinese names and many have been leading this market higher. AAPL was a bright spot on the session with the stock turning into positive territory helping the NASDAQ come well off its lows of the session. One day doesn’t make a trend and we’ll continue to take one day at a time while executing our plan.
Our weekly look at sentiment continues to tell the same story. AAII survey respondents continue to lean towards the neutral side of the market. NAAIM and II continue to remain super bullish and with $75 billion of fresh coin splashing in the hands of primary dealers why not be bullish? We know better, but we simply follow the trend. Perhaps somewhere down the line we’ll look back at this time period and laugh at this point in time. However, the time is not now and we’ll continue to move onto what is moving.
Much is being made over the Chinese PMI and what that means for the Chinese markets. The Shanghai composite continues to remain in the dumps and pricewise is in a downtrend. It will take something big to turn around that index. For now, price is not indicating strength in China.
Our markets on the other hand remain in an uptrend despite the heavy volume selling we witnessed today. Last week’s low on the S&P 500 is a key area to watch for. We don’t have a series of lower lows and a lower high. Before a downtrend will begin we need see a serious of lower lows and a lower high. The Dow did punched and closed through last week’s low and we’ll be looking to see how price progresses here. Two indexes that remain above last week’s low are the NASDAQ composite index and Russell 2000. We aren’t about to call for a market top with the NASDAQ and Russell 2000 remaining in their uptrends.
Do not begin to think you can outsmart the market here. Even if you put on hedges stick with the plan! Ride your winners and cut your losers.
