| | | This Popular Trade Is Officially Dead | Dear Reader, | Stocks and entire indexes tanked this morning, left and right, and, as always, the algos are right in the eye of the storm, directing the whirlwind. | A day like this is a game-changer in the sense that the ever-popular "buy the dip" trade is dead. No more. "Buying the dip" has become "catch a falling knife." The smoking gun here, of course, is the machines. | My subscribers and I have been great with our timing on moves like PANW and GIS. | The machines were using Apple (AAPL) to defend the 5400 level on the S&P 500 - below that and all hell… is at least more likely to break loose. Over on the NASDAQ, a slew of downgrades in once-popular stocks Intel (INTC), Microchip Technology (MCHP), LuluLemon (LULU), and Shopify (SHOP) wasn't helping. | And there was an absolute onslaught of selling of Amazon.com (AMZN) shares, which was down more than 8% and, like Don Kaufman says, close to the "point of no return." | In fact, it's tempting to think the machines have brought the entire stock market to the "point of no return," but don't be too hasty. | I still think turning bearish and putting on short positions with abandon is a mistake right now. The market is starting to become oversold, and, on the S&P 500, the 5000 level remains, for the moment, rock solid. | So I think the bears, in the near- and medium-term, could end up getting squeezed out in the week ahead. Momentum dictates the trend, and although momentum is starting to slow, the trend is still bullish. | Shorting this market, no matter how flashy the panic headlines are, is not advised. But I feel like the day is coming. Today was a transition signal day. | We're seeing signs that the economy is down-shifting from from growth to slow- or even no growth. Inflation isn't coming down, unemployment is creeping up and any rate cuts will be an attempt to hold off stagflation. | Professor Jeff Bierman |
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