We have a bloody open on our hands this morning, with the market now trying to punish the mean-reverting traders who flourished at many points during the past few weeks. Specifically, those who bought into Friday’s weak bounce are being put to the test via a 200-point move lower in the Dow Jones Industrial Average.
After a few quick daytrades (which I do not usually do but in corrective markets will do) I moved to 100% cash on Friday inside 12631 not because I predicted this move lower but rather because I just did not see enough of an edge to justify loading up long for a rally.
And when the market punishes those dip-buyers this harshly, it is just another piece of evidence of a changed market character and a correction broadening out. Playing great defense is optimal strategy for most traders in this situation, especially when you consider shorting here essentially amounts to shorting “in the hole,” which carries its own high risks.
If bulls cannot manage a strong rally into the close to recapture the 100-day moving average on the S&P 500 Index, the 150-day and 200-day moving averages are a ways lower, at 1532 and below.
A notable standout today on the long side is $CQB.
http://www.youtube.com/watch?v=cdO2eTCOp1I
