“The world is changing. I feel it in the earth, I feel it in the water, I smell it in the air. Much that once was is now forgotten; for none now live who remember it.”
– Galadriel, The Fellowship of the Ring
Please tune out everything you’re hearing about yesterday’s mass sell-off and absorb the following Trader’s Consensus from my most trusted sources…
From HCPG Blog:
We took out 3 major moving averages today, 20SMA, 50SMA, and tagging the 100 SMA which finally stalled the bleeding. From a technical point of view we’re working with damaged goods now. We’ll spare you the “stock picker’s market, be cautious, raise cash” cliches, but we think we’re in for a range bound grind of a summer going forward. Oh yes, and this will be a stock picker’s market, please be cautious and raise some cash.
…However, the argument can indeed be made that “this time it is different.” After all, it was only yesterday that we appeared poised for a major breakout, and now we are seeing a nasty reversal today. I suspect that we are actually going to see more mean reversion. Nasty breakdowns and exuberant breakouts alike will probably be faded. I am curious to see how this plays out. In the meantime, I am playing things so close to the vest that I can barely see my own cards.
People often ask me, “What will it take for you to get bearish”. My answer is simple. “When we see the 65MA cross on my SPX Bond stock ratio chart”…You can see that it is starting to uptrend, but still has a lot of room before we are looking at a possible cross.
From The Big Picture:
We have no shorts at the moment. Our selling has been selective, based on individual names — not a market call. Markets remain in their range, and within 5% of recent highs…I am more inclined to be a bear here than the metrics suggest, but over the long haul, I have learned to trust the data rather than my instincts.
My own take is that the momentum fun is over for the summer. The ebullience that once was from when recovery was assured, QE3 was a no-brainer and Europe was contained is beginning to be forgotten. The tone of this market has changed and I suspect we’re in for a very different tape this summer than what we’ve experienced from the August 2010 Jackson Hole QE2 announcement through this past spring. I’ve been saying this very loudly and publicly since early May here on the blog and on several television shows.