Editor's Note

A flood of negative headlines caused traders to throw in the towel. Today was a bad day for market sentiment. This was the day when investors were expected to put their election feelings behind them and concentrate on starting to build their portfolios for 2019. The fundamentals were in their favor with strong earnings and the historical trends were in their favor. Neither seemed to matter. The combination of negative headlines reinforced the negatives from the earlier crash and convinced investors there were problems ahead.

At this point sentiment has been dealt a very severe blow. Some 78% of Nasdaq stocks are in correction and the big caps are being flushed in heavy volume. Apple, FANG, biotechs, chip stocks and even transportation stocks are crashing. The outlook has turned from positive to negative and if it does not reverse into a rally over the next 48 hours or so, we are going to be looking at lower lows and a washing into year-end. The setup here is very bearish.

I heard one analyst today saying the average time to recover from a sharp 10% decline was 60-200 days. Confidence is shaken and it needs to be rebuilt through a series of gains and losses with progressively higher lows before the majority of buyers will return. Let's hope this is not the case in Q4.

 

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