Editors Note:

One day does not make a trend. The S&P posted a 5-point loss on Tuesday, 1 point on Wednesday and 36 points today. Today is the only day that counts. There have been other one day drops this year on March 21st (-29) and May 17th (-43) and neither decline saw the market continue to drop. The May rebound was immediate and the March period saw some volatility for a couple weeks but no meaningful declines. What should we expect this time?

The market is much more over overbought this time and we are entering into the normally weak Aug/Sep period. In theory, the market should continue lower but there is so much pent up demand from investors waiting on a buying opportunity that dip buyers could appear at any time. In a normal environment, I would be tempted to nibble on some positions today but this is not normal. With the geopolitical headlines surrounding North Korea and an impulsive and non-political president, there could be a show of military force at any moment. We know he is a counter puncher and Kim Jong-un knows he is getting under Trump's skin. This is a dangerous situation.

For that reason, investors probably do not want to be adding longs ahead of the weekend in a traditionally weak period. Of course, I could be wrong. We could see a dead cat bounce at the open on Friday and then another bout of selling.

I do not see any reason to be adding risk ahead of the weekend. There is a strong opportunity for heightened volatility. There is always time to enter new trades as long as you have cash in your account.


No New Bullish Plays


No New Bearish Plays