Yesterday's early action put the official stamp on my bearish stance this Fall. $CAT came out saying they are going to get rid over 10,000 of their workforce and lowered their outlook. Yes the CAT is out of the Bag. My question is who is next?
After yesterdays sharp morning decline a late day rally brought them back to positive territory. After the bell Yellen's speach goosed stock futures to fresh highs. Europe hopped on the rally bus... and this morning stock futures are over 1% higher.
One speech, one spike to the upside does not change the transformation we've seen with this market.
The opening bell is a few minutes away, so let me wrap this up.
Absent a massive rally, which I view as unlikely, S&P500 has broken out of the wedge to the downside. This market will not want to give it up easy, case in point yesterday's action off the lows, and the action into today's open.
Short term we have a breakout above resistance:
That trendline is now support.
Longer term the wedge has broken. We may give it a kiss before we say goodbye. But the odds, percentages, still point to a move back to the August lows.
With Yellen giving a hint that rates will rise before the end of the year, the US Dollar should break out of this formation to the upside. Ultimately this will not be good for corporate earnings, stocks, and emerging markets.
Amid this pull back, there are going to be many a day when stocks rally 1%. More recently we've seen these rallies fail as prices fade. On the other side of the spectrum we need to be protecting profits and wary for that out of no where spike. Just when stocks looked ready to break lower this week, the buyers swooped in and took the market by the horns.
While I'd much rather the market plunge back to the August lows and get it over with, I know its going to be a tough slog, but one I think will be more profitable trading for downside, then timing those random relief spikes to the upside.
In hind sight I wish I emptied all my puts yesterday near the lows. Instead I locked in and thought perhaps this would be one pull back that didn't have a nasty reversal. I was wrong.
But as far as a move back to the August lows? I don't think I will be wrong there.... it will just be a matter of timing it. And if this market is anything like it's been throughout 2015 - it's not going to give it up easy.