The latest market selloff can be blamed on any number of things. China slowdown or a possible hard landing in China, basic profit taking after a six-year run, declining earnings, no further QE in the US, a uptick in rates in the US, weak US economy, commodity (including crude oil) collapse, weakening of 'risk' currencies due to the commodity selloff, disappearance of buybacks, dividends being lowered, strong US dollar pressuring balance sheets, bear markets in pc sales, rail fees,.........the list goes on and on. Bottom line: we need something solid to rally on and I fear any earnings pops will be given back. Netflix will be a good example tomorrow after the close. We simply cannot justify going higher without a catalyst.
The Wall Street Journal reminds us that this is not 2008 redux but just 'where' we bottom is open to speculation. So I'll just sit back with my hedges and wait it out. Here I'll note a few things I haven't seen plastered across the internet.
Although the monthly isn't complete, we already have a bear cross in major moving averages. .
The 20 month moving average now becomes my "prove me wrong" area of resistance unless I hear something bullish out of the Fed.
We decisively lost the 30month EMA (the 20month now becomes resistance). By the way, did you notice the selling along the way up? Rate of Change definitely showed it as the market crawled higher. A divergence right there if you were watching.
So now we watch for possible supports. Will we retrace off the 2011 low?
Or something much further off the 2009 low?
Of course, by the time the pundits on CNBC or elsewhere admit we're in a Bear market defined by a correction of at least 20%, then we'll be nearing the bottom but more and more seem to be accepting that it's here. Small caps who tend to perform well this time of year, are already down 22%.
Stay in cash or have a hedge. "Buy time" will come. You just need to sit on hands and be patient. The market's not going to disappear. Trust me.