Much dreaded 10% pullback came to fruition with actual decline of 9.8% in S&P 500.
Many are wondering IF 9.8% pullback is all we are going to get?
BUT..first we have to look @ what caused this pullback.....
-Stocks were overextended, making series of all time highs in DOW & S&P 500.....
-China slowing down to 7% growth from around 12% growth
-Europe struggling big time, on the verge of recession in Germany which IS the biggest economy in Europe.
-Oil price slumping to multi-year low below $80 is a direct reflection of slowing China.
-Trade sanctions imposed on Russia is another economic blow to a struggling world.
-Ebola scare continuing
-ISIS attack by Allies is another economic drain costing billions
TAPE is trying to discount all of the above.....we will only know in two weeks IF all is discounted and TAPE is looking ahead to resolution of most of these issues.
My guess is that most issues have been discounted, but few remains on radar for this market mainly Europe & Ebola.
We have moved UP 3.63% from low, after a 19 trading day serious decline of 9.8%.....
We may be looking at two positive catalyst for this rebound, first is earnings and the second is Fed tone may change based on Fed proxies statement back to back for two days.
Market internals are remaining in extreme bearish mode which is a contrary indicator, first only 37.8% bulls vs 17.3% bears, put call ratio is also negative by put purchase of 1.2 to 1 ratio.
Hedge Funds & all Money managers have lowest allocation to equities since 2012, that means IF investing environment improves then those indicators will turn more bullish & equity allocation will improve.
I personally believe that we will take out 200 DMA @ 1906.02 in S&P 500, this will give confidence to many to put back capital in markets.
ECB may give further boost to equities by taking action vs ongoing talk of Asset purchase.
SO..lot has been factored in already and we are on the verge of gradual improvement in equities.
BUT...it remains a volatile trading market for now, it is important to adjust to this new reality of a different TAPE.
BLOG does NOT give buy or sell.
Saleem
9 comments:
Hey Saleem,
A weekend vacation again puts my normal Sunday posting on hold. The portfolio was up 2.09% last week, so that was a good thing.
I think this market has some fake scares and some real ones. I consider Ebola and ISIS as fake scares, but the slowdowns in Europe and China are real ones (and how they may affect the US pace of growth). The thing I don't have a great handle on is how much more deceleration Europe and China might have, or if this is just a reset lower that has already happened.
I think we are already through the "fear" phase of this selloff and I expected the $VIX can settle down from here. The question is how much earnings estimates need to come down, and if the market has discounted it all already.
I think selective buying will still work here, and I'll be doing some of that myself.
Stocktrader
Hi Stocktrader,
Our analysis is covering all the issues which has potential to impact TAPE..
Good luck with your Strategy.
Saleem
Hey Saleem,
One big thing I'm watching for as an indicator of more weakness to come is the copper price. We are close to revisiting the March lows and an important test may be coming as the Fed ends its bond buying program and China's property market continues to cool.
On the brighter side, weakness and rethinks at big tech companies like IBM and HPQ highlight the strengths of the new-tech companies like SPLK, PANW, and NOW. These are on my buy list this morning.
Stocktrader
Hey Saleem,
Bought SPLK @ 55.77.
Stocktrader
Hi Stocktrader,
Many things have been discounted and should be a non event.
Good luck with your purchase.
Saleem
Hey Saleem,
Bought PANW @ 100.07
Bought NOW @ 59.486
Stocktrader
Hey Saleem,
Bought PFPT @ 36.084.
Stocktrader
Hi Stocktrader,
Good luck with SPLK, NOW, PANW, PFPT...your fav Quad.
Saleem
Hey Saleem,
Yes indeed! Although I have to admit they aren't acting particularly well today. Maybe people are just distracted with others things...or maybe I'm just wrong...
Stocktrader
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