Submitted by Mark Hanna
Courtesy of MarketMontage. View original post here.
This market selloff has been constant but a very slow bleed – a cut by a thousand knives sort of thing. Half a percent here, one percent there, a quarter of a percent over yonder. Unfortunately each time we gapped down last week, buyers came in mid morning (before the late day fade) – which slowed the progress of creating any true oversold condition. Then this week rather than gap downs, there has been a very persistent overnight buyer who almost immediately after every close has been coming in bidding up futures. So the market opens up, goes sideways to up, and then (once again) fades late in the day. “He” was busy at work last night and futures were up significantly (well over half a percent) but most of that was lost about 40 minutes ago as the market went flat. Since then it has gone into the red a bit.
The most “healthy” setup to create a sustainable bounce of any sort would be some sort of flush to the downside. Some panic selling where “dip buyers” finally throw up their hands in disgust, etc. Those folks have been losing fingers day after day in this selloff trying to catch the knife. That “puke” type of selling would more easily lead to buying that lasts for more than 4 hours which has been about the maximum we’ve seen the past two weeks. But due to conditions listed above, we have yet to see such action. It’s been a very slow pulling off of the Band Aid.
Now with that said, certain sectors have shown that ‘waterfall’ selling – I mentioned commodities earlier this week. Some of the individual charts in this group are massively oversold, and are due for a reflexive bounce. I picked out just a few names for an example of the damage.
Silver
Nucor – steel
National Oilwell Varco – oil services
Vale – mining
Freeport – copper
Peabody – coal
And speaking of commodities, Brazil – which is heavily commodity focused in the major ETF that trades in the U.S. has also fallen off a cliff.
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Any securities mentioned on this page are not held by the author in his personal portfolio. Securities mentioned may or may not be held by the author in the mutual fund he manages, the Paladin Long Short Fund (PALFX). For a list of the aforementioned fund’s holdings at the end of the prior quarter, visit the Paladin Funds website at http://www.paladinfunds.com/holdings/blog
