Both @RaginCajun and I have been in heavy cash inside 12631 for a while now, given the market’s recent propensity to display indecision in both directions. There are certainly some select quality short opportunities, like our short VLO play as the refiners weaken, as well as quality long ideas like PNRA TRIP.
But beyond the metals and miners there is little doubt that we are looking at a market in flux, despite the backdrop of bearish sentiment we discussed last week. Price action trumps all in the end. And this action is the type where you see many traders throwing their egos on the line, trying to make a superstar play in a devious tape.
The S&P 500 is still basically right near all-time highs as I write this, at 1572 (1576 from October 2007). So, turning overly bearish seems foolish, just yet. But the issue always comes down to what the correct decision is based on what the market is actually telling you. Here, the market, at a minimum, is clearly stating it has some issues to resolve and momentum longs should be showing patience.
We have seen one riveting comeback after another by the bulls this year.
So, at this point, what would surprise the most amount of market players–A flat close after an afternoon rally? Or a bloody close on the lows?
If the gold story can calm and the focus gets back to earnings that should help bull case;
Earnings from oil, XOM, SLB, HAL and the like should help market see life without gold
Same for Dow components like IBM, JNJ if they disappoint in eyes of market, then it would seem correction may be longer, deeper.