Stocks fell the most in two months today, and I am sure there will be plenty of "Market Crash Looming" or "The 33% Pullback in Stocks Has Already Started" articles popping up at your local top calling financial publication over the next 48-72 hours. It's to be expected as all those watching the news tonight, will be wondering what the heck happened today, and searching the web for an answer.
So why did the market sell-off today? Some say it was Apple (AAPL) that dragged down the market, as social media came alive with #bendgate and an IOS 8 update was pulled yesterday after causing IPhones to lose cellular reception. Others would say it was the lackluster August Durable Goods report which showed a drop of 18%. Or maybe it was the continued ascent of the U.S. Dollar, who's strength can take a bite out of the earnings of U.S. companies doing business abroad. Heck, there are some even as bold as to cite Rosh Hashanah as the catalyst for the pullback. My guess? No one really knows the exact answer. The real question is, what will happen tomorrow and going forward. The Bears will say this is the start of the long awaited crash, while the Bulls will say this is just another buying opportunity in waiting, as all the others have been over the past 5+ years.
My stance? I am still bullish on equities, and think Bonds, Treasuries, Gold, Europe, Japan, China, and other assets classes are not the first choice when it comes to folks putting their money to work and looking for a return on their investment. More on that in a future post.(For what it's worth, I have been a Market Bull since late 2011. You can read my thoughts over the past year, where I put crosshairs on the 2k level on the S&P: https://www.optionmillionaires.com/market-headed-higher-part-2/ ) . At the same time, i think this market is primed for a short pullback, and today's action confirmed some of my concerns since Friday.
I voiced my concerns on the morning watch list on Tuesday:
Couple of reasons for my change of stance here since friday:
Posted my charts and thoughts on Twitter:
UPB also posted a very prophetic chart last night and sounded a warning:
And my thoughts again this morning even with the futures in the green when I penned it:
Sure enough, the markets faded at the open - slowly at first, but then the selling picked up steam. The S&P broke and closed under the 50 day moving average. And for me, I think that sets us up for continued pressure short term and a move to at least $193 on the SPY in the coming sessions.
Sell-offs with no true catalyst are the ones that get my attention. Janet Yellen makes a gaffe, the biggest Bank in Portugal defaults on their debt, the U.S. credit rating is lowered - these are events that would put explainable pressures on equities prices. Today we lacked one. With markets just a few days removed from all time-highs, a pullback is welcome. And a decent pullback would be enough to shake the bulls, and embolden the bears. And I think that will set the market up for more highs before the year is out.
Here is where I think we find some support now after we closed under the 50 day moving average today:
I was keeping it small coming into today, and will look to continue to play some puts for more downside in the next few sessions, or until we get back above $196.99 on the SPY.
Happy trading all!!
- JB