Anyone reading the blog, or following on twitter will usually know my thoughts to be bullish in nature. I have been a "short term" bull since the fall of 2011 - almost to a fault.
The last few weeks have tested my resolve. I always said that the sell-off's that worry me are not the ones that are headline driven, it's the ones that start with no real catalyst. I figured this momo madness was a result of a Yellen miscue after the Fed meeting in March, where she hinted at rates rising in March of 2015. The minutes for that meeting came out Wednesday, and her gaffe was negated, as the minutes carried a dovish tone. The market rallied and the momo stocks, including biotech, rallied hard. My conclusion? That rates rising sooner than expected was really the reason for the momo sell-off. I remained steadfast bullish and figured we would hit new highs this week... Then yesterday happened.
I spoke about it on the week ahead that i needed a few events to happen for me to start getting more cautious and maybe buying puts. The $SPY would have to break under the 50dma, and the sell-off would need to spill over into other sectors. That started to happen Monday, as financials weakened, but yesterday the sell-off was broad in nature. And worse yet, the value plays started to get hit at the end of the day. The VIX also rose double digits. It was enough to get me into some puts at the end of the day.
I am not switching the course as of yet for 2014. I still believe we see new highs at some point this year. But to me it seems folks are behind the scenes slowing selling every ramp, and it's only a matter of time before the rest follow... I hate to be a bear right now, because it seems like the pundits on TV and social media have been clamoring for this for sometime(and I hate to see Gartman be right). But as of now, I will be looking for bearish short term bets till this resolves.
During the US debt downgrade in 2011, there were stocks that saw mind numbing declines. I am not going to say we see that here, but if this is just the beginning of a multi-week pullback, stocks like CMG, PCLN, NFLX, LNKD, YELP, and others may continue to come under some major pressure and remaim oversold for sometime. On the other hand, relief rallies like we had tues and weds may shake some from their bearish bets...
Ill have an update over the weekend. But I think UPB has used the best analogy. As the market ramped it felt like the market was a beachball, trying to be pushed under water. Now it feels like an anchor trying to be lifted out of the water.
Will be watching 181.50 then 180.13 as areas of support on the SPY.
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