Kicking off the day with horrible economic news was the ADP employment report showing a measly 38,000 jobs created last month. Terrible because the street was looking to see a gain of 175,000 jobs! In addition, the ISM Manufacturing index slowed again nearly contracting coming in well below consensus estimates. Once again economic data hinting at a significant slow down in the economy. Volume run rate was running higher (excluding end of the day volume from yesterday) showing institutions were out in full force dumping stock. By the end of the day bids were not to be fund and stocks could not find enough buyers to push. Despite yesterday’s bullish move, today’s move certainly removes any notion this market can move higher going forward.
Last week I spoke about a possible rally forming that would last around 1-3 weeks. June is not known for successful market follow-throughs. Instead, June tends to be a month where headwinds finally catch up to the market. Crashes on the other hand typically do not find their way into the market until later in the year. Fear certainly picked up today with many fleeing stocks, the VIX was able to break free above its 50dma showing some fear. However, the index closed just above 18.00 suggesting we haven’t had any panic move by any stretch of the imagination.
The action today will certainly kick off sirens regarding a double dip recession and more debt issues across the globe. Commodities fell today with the CRB index getting rejected at the 50 day moving average. Prices want to come down to adjust for the actual market conditions. Corrections are apart of life and help regulate markets. Do not fear market corrections as they do lead to bottoms and powerful moves to the upside.
More than likely we’ll see some sort of short-term relief from today’s selling. It would not surprise me to see the market gap to the upside tomorrow, but the trend is clear and it is DOWN. Take profits off the table and cut any laggards. Do not HOPE for stocks to push higher as you will more than likely get burned. Heading into the summer months markets will be illiquid and prone to failure. Perhaps we will finally see the market correct more than 20% setting us up for a big run into the New Year. It is all speculation now, but be prepared for the worse here. Heavy volume selling like today is never a good signal after a market follow-through day.
Summer swoon is upon us, cut your losses and start looking for shorting opportunities with Big Wave Trading.
