The 'Buy the North Korea Scare' Trade Was Just Too Obvious

 | Sep 05, 2017 | 10:47 AM EDT
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IWM

After working twice, the "buy the North Korea scare" was a little too obvious Tuesday morning. There was some dip buying, but so far it looks like it was mostly flippers looking for a quick trade. We'll see how it develops from here, but the buyers are hesitating.

Breadth is running slightly negative, with about 2900 gainer to 3400 decliners. There are about 200 new highs, which are primarily biotechnology names, so there are still some pockets of momentum. Hurricane plays are active again with Lowe's (LOW) , Home Depot (HD) , Lumber Liquidators (LL) and other repair stocks on the radar.

One hurricane-related play that I am long is Winnebago Industries  (WGO) , which has an attractive chart and may benefit from the need for temporary living quarters.

I covered some index shorts this morning, but held a position and will be looking for re-entry if we challenge the year lows. The "buy the dip" trade is still working, but the failure of that automatic response will eventually offer a good opportunity.

I'm battling a cold, and it is keeping me from being very aggressive. The Russell 2000 ETF (IWM) is looking the weakest of the indices, and that may be the place to focus if you are looking for index shorts.

Keep an eye on the 2465 level of the S&P 500. If that is breached, I expect the gap down to 2458 to fill.

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