Following Europe’s lead the US markets ended the day lower on higher volume. Europe really got things moving with the DAX nearing August lows. A late day rally did take the sting away as the NASDAQ was down more than 100 points at its lows. Volume was up day over day and coupled with the price declines adds a day of distribution. Given the distribution the day after a follow-through day and today’s move this rally is all but dead. Key levels for the major market averages will be the 10 day moving average. Odds remain against this rally for a variety of reasons. The long side still remains a bit dicey and cash remains king.
There are a few names still holding up. Unfortunately, they are few and far between. AMZN is a big name still worth noting and continues to hang tough in this market environment. We can tell you about AMZN’s ridiculous PE and how it should be trading at a lower multiple, but the market simply doesn’t see it that way. For now, the stock remains resilient despite the negative price action. Stocks displaying relative strength will be the ones most likely to lead the market higher once conditions are ripe for a stock market rally. ADBE is another stock hanging tough. High relative strength stocks are not hard to find if you know how to look for them.
Remain patient despite the urge to have action in this market. There is no need to put your hard earned capital at risk when conditions are not optimal. Select shorts will certainly work here, but trying to pick a bottom or go all out short is simply not a wise course of action. Stay patient and keep your powder dry for when we are able to have market conditions in our favor for a new sustainable rally. Otherwise we are just gamblers looking for action. Ignore the noise and keep patient.
This market is certainly not ready for prime time just yet. Cash is king and we await our opportunity when the time is right.
