(Below is an excerpt from a recent post inside 12631–A premium service available to members of The PPT)
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Unlike the past few months, this time around there is no real sense of urgency from underinvested bulls or panicky shorts to buy the dip or cover shorts after the past two days of the market selling off. You should take this change in psychology very seriously in the short-term, in my view. Although I have no doubts that we remain in a multi-year bull run, corrections along the way can be much more painful than we remember, seeing as we have just experienced a daily drip higher for the past few months that made a mockery of short-sellers.
The pockets of momentum longs are shrinking by the day, and the small cap oil names can only run for so long. In corrective markets, I tend to stay away from playing “breakouts,” as they have a propensity to fail when the market is shaking out latecomers and weak handed bulls. However, as a correction progresses, I will be looking for “support” plays more so, or names that simply are attempting to stabilize after a sharp sell-off.
While the market may pull off another v-shaped bounce to new highs, we have a proliferation of sloppy, if not broken charts, and change in market character.
