JFarrish Sept 22 - The battle of stupid continues with the market reacting again to news

The battle of stupid continues with the market reacting again to news… at least that is the explanation that everyone wants us to believe. Shall we review the theme song from yesterday? Lack of clarity and conviction allows the markets to react to news it would normally take in stride or ignore. VW Motors falsifying documents on emissions tests is a big deal. The stock has fallen dramatically on the news. I would say the concerns are justified when it comes to the fines and other backlash they will face from around the world. But, should Europe correct 2% on the news? Should the US markets react lower by the same early in the trading day? The reality in a perfect world is probably not… but, we don’t live in a perfect world. It might be said that we live in a world of confusion and disorganization relative to economics. Yesterday Hillary and drug companies, today VW Motors scandal, tomorrow jokes about what do Hillary and VM Motors have in common? They both can cause a crash in the markets:) Well at least a turn lower for the day. Thus, news rattles an already fragile investor confidence level and the sellers take advantage of the nerves and hit the sell button. Again, cue the theme to ‘Jaws’! It isn’t safe to go back into the water.

For all the goodwill done on Monday… Mrs. Clinton and VW Motors have managed to erase. Speaking of Mrs. Clinton, the biotech sector continue to fall on the day losing 2.2% on XBI which did manage to bounce off the low of the day. The Volatility index did move back to the 23 mark showing some movement on the challenges presented today. How this unfold near term is still a flip of the coin. I would like to say I believe in the market moving ________, but the positive patterns looked ugly today and we are heading back to the drawing board. The good news for Tuesday was it did manage to bounce off the lows and hold support at 1930 on the S&P 500 index.

One question asked today was if the test of 1930 was the retest many are looking for technically? Do we head back towards the 1993 level again? It is important to note that the bottoming pattern of the ascending triangle broke lower and negated the positive outlook some assumed. The reality is the pattern was a bear pattern and thus, the drop lower would be anticipated statistically. How far the downside move is a question up for debate. Holding 1930 is key for now and if this move back below this level the 1905 mark would be the next support to watch. This party is far from over and it could become more volatile before it calms. I have one word posted on my computer screen currently – ‘directionless’. That is my view of the markets overall. Until it finds some source of direction and a reason that is sustainable the volatility is likely to continue.

All ten sectors of the S&P 500 index closed in the red. Worries are on record. Overnight Asia is likely to respond to the rest of the world and then we will look at how the futures unfold in the morning and evaluate the damage as it relates to the any opportunities. If the downside follows through on Wednesday the short side trades will be attractive again… assuming we move below the current support levels. Volume on the selling was elevated more so than the buying on Monday. I am on the side of the sellers having near term control for now. If this follows through we will take the opportunities as they are presented. If we bounce tomorrow that only serves to muddy the water more currently. The best course of action is patience versus dancing the two-step with the emotions of the markets. Plenty of fun for all…