The Critter Scramble
Play nice Boys, I mean it!
As the closing bell rang, Hoofy wiped the sweat from his brow as he loosened his tie and mumbled, "Considering what happened in the foreign markets, I guess it could have been worse." Just then Snapper busted open the double doors of the bank, came runnin' in like his shell was on fire and yelled, all out of breath - cause Snapper, being a turtle, never really runs anywhere - "Hoof, hoof, ho...ooof." "Slow down Snapper, your gonna give yourself a heart attack." Hoofy said with a half smile. "What's the matter?" Leaning over holding onto his knees and barely finding his breath, Snapper finally blurted out, "Did ya see, did ya see? It's all over the Street. The market's broke support and Boo's takin' over! What'r we gonna do?"
Hoofy, knowing throughout the day that something like this could happen, replied, "Snapper, it's gonna be okay. Nothing's confirmed yet. It's only the first hiccup in a long line of events that have to happen before Boo gets back control. Besides, it's that type of attitude that won't let him." Snapper, possibly the friendliest but not brightest critter in town, just looked at Hoofy with confusion on his face. "Snapper, this market has been trading at a level of complacency that would make any contrarian smile. This is exactly what the doctor ordered. Maybe this will finally wring some of that out and give this market some good ole fashioned fear."
Across town Sammy, being the collective sidewinder he is, was chillin' at a small table outside Olie's diner and sippin' some afternoon tea. Sure as the day is long, here comes the pretentious bear with a strut that would put John Travolta's character in Grease to shame. "How ya doin' Sammy? See the market today?" Boo said smugly. Sammy looked up out of the corner of his eye and replied, "Sure did Boo. I spent the day reallocating to accommodate the current situation." "You mean sellin', right? Or haven't ya heard; I'm takin' over. Hoofy's had the reigns for almost 12-months now and it's time I get back in the saddle. All the majors have given up their trends and are about to crater through horizontal support. I've also got the Fed and BLS on my side. What else could I ask for, a cherry on top? Once I get a light volume upward confirmation and retest of the latest support we just broke, it's back to shortin' instead of snortin'!"
Sammy smiled, paused and said with an almost whisper voice, "Not so fast Boo. It's not that simple. You may be right, but you just can't make all those assumptions. I'd hate to see, even you, jump into an empty pool. All's I'm sayin' is you'd better check the water before you dive in. This isn't 2000 ya know."
Over the last 2 months this market has given plenty of investors a good case of whiplash. Adding to that theme, I wouldn't be surprised to see some sort of bounce within the next week or so.
When major trends and/or supports are broken it is normal to see a confirming retest within the next week or two to actually confirm the trend has officially changed or the break was for real and not just a shakeout. You can already start to see some of this type of action in the SOX and XBD. Keep a watchful eye on floors & ceilings of all secondary and major indices.
The key to look for in a bounce is the volume and yesterday I alluded to a small possibility of momentum divergence within the 3-majors. This will be another road sign that could possibly come up. Whatever the case, the action over the last two trading days commands much respect. It is too early to tell if this is the start of another prolonged bear session, but we have to be prepared for all the possibilities.
Until next time...
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