The poor action yesterday has resulted in less aggressive dip-buying this morning. Buying pullbacks always sounds like a great idea when the market is uptrending, but when there is real weakness, doubts creep in quickly.
The market has managed only a few feeble upticks and is hitting new lows an hour or so into trading. Breadth isn't terrible at about 2000 gainers to 3150 decliners, but it is slowly slipping. All major sectors are red with precious metals, oils, homebuilders and technology showing particular weakness. Even Google (GOOG), which has been the shining star of the market lately, is down.
In this environment, the first thing you need to do is be sure to make the necessary defensive moves and take those stops, even if they are painful. Once you are positioned, you can start hunting for new opportunities. I'm confident we'll see an energetic bounce before the week ends, but the million-dollar question is from what point. Poor timing quickly eliminates potential profits.
I'm starting to work on a shopping list but it is doesn't contain much yet. Sarepta (SRPT) remains one of my favorites going into upcoming data, but like many other stocks right now, it continues to see pressure. Nanosphere (NSPH) is another stock I've discussed numerous times, and it is pulling back a bit.
The dip-buyers are in hiding, and that may not be all bad, as the market washes out further and develops a higher level of negativity. The further it drops now, the better the potential for an eventual bounce.