Don’t blink. Reversal up Monday, a reversal down Tuesday culminating with a nauseating drop into the close on Tuesday’s half day. Of course, we walk into a gap to the upside getting back some of the drop from Tuesday.
But nothing has changed. Big picture is still that January 29 was a high that we thought would stand for a while. We thought it felt like a climactic move into the end of January. The thought process was after a big 2013-14 because of QE3, markets went into a 18 month trading range until the breakout the day after the election. We had that feeling we were entering something akin to that period. So far, we stick by that mantra…but knowing the NASDAQ/NDX/RUSSELL have done better than the rest.
There is nothing wrong with long trading ranges after such a move. It is the working off of the last strong move and its froth. Of course, trading ranges can turn into real bearish markets. The range in 15-16 had the RUSSELL drop 30%. This is why we watch areas and levels. In this range, emerging markets are leading down while more than half our market does not act well. Also, the DOW and NYSE are getting the worst of it.
So we are patient and we stay patient. This is part of the process. Earnings up next starting late next week.