THREE DISTINCT POSSIBILITIES GOING FORWARD
If you don't want to fall victim to mental inferiority complex as a result of a bombardment of conflicting information, it may be best to step away.
Europe was up last week. The US markets were unchanged. China took a bath as the country heads into a one week long holiday. At least we won't have talks of the Chinese markets tanking adding one more piece of confusion to the puzzle here.
By the looks of things, we are destined to take out the August lows. At different points during the month of September it looked as if we may escape that reality. Then 3 days later it would come back into focus. It has definitely come back into focus here as weakness in the market leading tech sector seems to be giving credence to this possibility. I'll have more on the tech sector weakness in the weekly chart review later today.
I'm roughly 50% invested and not happy with the results over the past couple of days. If the S&P breaks 1120 this week, I will be raising more cash, most likely at the expense of TMV and FAS. FCX is a very small position that I will keep.
The swoosh effect of a break of 1100 is not something I want to sit through just in case I am completely and totally wrong with respect to outcome of such a swoosh. When you have a build up of anxiety and fear with the market suddenly breaking important technical barriers - should the bulls prove unable to step up to the challenge - things can get very ugly...very quickly. A small possibility, but nevertheless, one that should be entertained at this market juncture if you are interested in preservation of capital.
It's a confusing and muddled picture. I will attempt to simplify it into three distinct possibilities going forward:
1. We break 1100, take a trip down to 1050 before reversing back up and rallying through October. My problem with this is that a lot of people have been talking about this outcome. Doesn't mean it won't happen, but I don't like having so much company.
2. We find support above 1100 on Monday and begin rallying above 1160 on the S&P. The problem with this scenario is that without the swoosh down to mark a final rinse, subsequent rallies won't have the power they need to breakout of this devilish range.
3. We break 1100 and it doesn't stop. We simply keep going until S&P 1000. Under this scenario every last bull would be rinsed. The worst case recessionary scenario would be priced in. Barring Morgan Stanley or some other troubled institution going under, such a move should mark a bottom.
I will be looking to put cash to work on a move below 1100 and a reversal back up. Buying into weakness expecting S&P 1160 or 1140 to hold is asking for trouble. At a minimum, wait for some type of bullish reversal so that risk can be defined.
This is a fluid situation and the scenarios are subject to change on a day to day basis. A reflection of the difficulties in attempting to come out of this range with profits.
Barf bags, therapists and odd twitching optional, but totally understandable.
