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The gap down in the futures in reaction to the jobs number last Friday has found some footing this morning, with the major indices down well over 1%. I am not interested in front-running the buy-on-the-dip crowd here, as I am inclined to let this correction play out while sitting on a heavy cash position. As far as specific levels are concerned, initial support was found at 1378 on the S&P 500, though the rising 50 day moving average is down at 1371. I suspect that key reference point may act as a price magnet.
I also see the temptation to “talk up” the market here, as Apple is in the green. The dip-buyers have had success for months, and it should come as no surprise to see them attempting to make the magic happen again. However, I am looking at the broad landscape here. Overall, I see a market that clearly is struggling after churning and flopping around in recent weeks. Pockets of momentum have become increasingly narrow, and to me that is a sign to back off the gas pedal until that clears up.
In no way do I expect the entire bull run to fall apart. Instead, I am merely managing the trend and trading around it accordingly. Your top priority as a trader should always be to preserve capital, particularly when the market is not as energetic and healthy as it had been. That said, I am keenly observing the action today for any signs of stabilization. Indeed, the power of a large cash position is having a welcomed sense of objectivity in the face of this type of market.
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It’s strange seeing the majority of my junk bonds trade higher today. They dropped a bit late last week. They certainly are not as volatile as the stocks (jrcc, xide, xco for example).