Buy the dip shifted to sell the rallies weeks ago — investors and traders alike were just too scared to admit it. The rally last week after positive China news was, to me, the last chance opportunity to correct the bearish downtrend we’re in.
However, what happened last Monday? Stocks opened up strong, and sellers immediately stepped in, rejecting the price action with force. Not surprised. *cue vindictive, spiteful face here*
The market can’t trade higher while FAANG, industrials, and transports all continue to get whacked. Facebook, Apple, Netflix, and Google make up too high of a percentage in indexes and sectors alike.
This means that as they fall…
They’re literally a giant weight pulling down the rest of the market. Amazon does as well, but it looked like it would be the first to try and recover last week. (Well, that recovery failed.)
Now the S&P isn’t in a bear market yet because of a few key sectors that remain relatively strong. Sectors that I personally, as an aggressive, directional trader in a bullish market, never gave the time of day until now. Here I am experiencing personal trading growth…
Think of it like a seesaw – tech goes down, Staples goes up. This is the only reason the S&P hasn’t (yet) reached bear market status.
So there’s got to be strength somewhere then, right??
Well even (my poster child) MSFT is hurting — along with CSCO and INTC. IF the market rallies tomorrow (countertrend Tuesday anyone!?) I look for them to trade higher first and provide some level of relative strength.
But hey, healthcare has held up well!
However, it can’t turn the entire S&P positive all by itself. I like consumer Staples and stocks like Coca Cola, Pepsi, and Proctor and Gamble. I’ll turn to these in this market.
Now, all of this being said — I do think, after the blood bath this week, we’re primed for at least a couple day rally. But be wary, I think it’ll only serve to suck buyers in and crush their last bits of hopes and dreams (try not to be one of them) but the market can’t go straight down.
Or at least, it typically won’t.
So — yes, I’m bearish, yes, I’m selling the rallies in this downtrend, and I’ll possibly trade short term, intraday short squeezes higher.
But I’ll keep in mind the writing on the wall…
There are impending signs of a recession everywhere we look. Strong dollar, rising rates, tech bubble, lowered guidance on earnings in Q3, housing slow down, consumer debt at all time highs, death cross. So of course there aren’t buyers in this market.
And, the more the news focuses on this, the less buyers there will be.