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Steady As She Goes June 10, 2017

Posted by Tom in Thoughts.
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June 9, 2017 – This will be short because really . . . not much has changed.  Yes, the market did drop quickly and significantly on Friday afternoon, but by the close a good bit of it was recovered.  I think the question is not “is this the top of the market” but more like “are the big guys rotating out of Tech and into something else” (like Financials)?  There are a few reasons why I believe this, but note that while the major indexes did drop, the Russell 2000 (small cap) index hit a high.  The vast majority of the time the small caps will lead the markets down as investors exit the more speculative small cap stocks.

Also, note that price still remain in the upward price channel and still above the most recent support level.  What caused this sudden drop is anyone’s guess, but the quickness and volume point toward computer algorithms and not just humans.  Once the “algos” kick in and start moving prices resting stops (all ready in the market) are taken out, thus the move increases in strength.  We should know early next week if there is real cause for concern.  In the grand scheme, the market was over bought, that is it was at the top end of that price channel.  Correcting back down toward the lower edge is typical.  I’d wait until Monday afternoon though, as the weekend investors may panic and sell out on Monday morning.  That’s how money is made on Wall Street: buy at wholesale and sell at retail.

For the time being (subject to immediate change) I’ll stick with Semiconductors, China Utilities and Consumer Goods.  Have a good week.  … Tom …

 

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