Well we are right back at the exact same spot we were last week. The S&P has regained its 50dma with some thunder today. The buy the dip trade is still intact. A little more sloppy this time with a lot more panic but we are right back where we started pretty much.
It seems the moustached men in NY aka the federalies led by their fearless leader helicopter ben. I personally was hoping for a litte more mayhem some real panic, destruction. That typically is when the biggest gains are made. But Im glad we made a comeback, a lot of accounts in twtterdom needed some serious repairing. Most people have probably made their money back and hopefull some extra. I think last weeks dip in hindsight will be a good lesson for most on risk, overconfidence, greed. A lot of people were caught with their pants down and incurred huge losses due to an abundance of risk and overeliance on penny stocks radiating through portfolios. I could feel the panic just from watching the feed on BOWS and the latenight emails I got. When people are daytrading their retirement accounts you are asking for a very large drawdown. We are gonna look back at that dip last week as a positive. When accounts are down 20% while the market is down 5% that means things got out whack.
The good thing about todays tape was the rally in the Russell2k. Smallcaps had led the breakdown and have incurred some serious technical damage that will take time to heal itself. All last week we had heard the risk aversion trade was back on the table and the boners on CNBC started using their fancy terms “flight from risk” “risk appetite is weaning”.
As you can see the Russell2k still has a ways to go to repair itself. But we are on the way. My only worry was the level of the snapback in the indices was accentuated due to extreme oversold conditions. Now that those conditions have worn off what will be the next catalyst. Obviously the next potential catalyst is the jobs data. I have no urge to try to game this which is why I sat pretty tight today. As a technical guy I view a lot of the snapback this week due to an oversold rally. Now we need a forward catalyst. Tomorrow could provide that or it could be another overhyped jobs report.
adios
