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Clearly, The Rally Did Not Have Legs

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Well, it was one of those days. We had our first failed rally since last July, and the market decided to fail with a purpose.

It was sort of a perfect storm of bad news (sovereign debt problems in Europe, unemployment problems in the US, a rising dollar, and the Treasury Secretary pushing for increased taxes on traders) caught many by surprise and the selling began. The hedge funds were caught leveraged long, and had to sell to cover their loans.

Since we last saw this in July, I thought it might be interesting to see what happened with the market then. In July, we had the failed bounce, we ground around for a few days directionless, then second quarter earnings announcements hit and the market took off higher. Since we are mostly through fourth quarter earnings announcements, and they’ve been good all-in-all, we don’t have that catalyst. We could have a better than expected jobs report in the morning, but that would just contradict this mornings unemployment number that showed that layoffs were continuing.

I’ll be reviewing things to see if I can come up with a catalyst, and if I do, I’ll share it with you. In the meantime, we still have stop loss orders in place.

No trivia tonight – I’m too pooped after talking on the phone with other money managers and traders to get their take on the market. There is an odd dichotomy of people who think S&P 1050 is the bottom of this selloff and that are planning to put money to work and people who think this is the beginning of something bigger. Also, sorry for the sad song on the video – it just reflected my mood.

Here’s wishing us all a better Friday in the market.

Mark