The Market's Mood Shifts

 | Nov 08, 2012 | 4:20 PM EST
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When there's a little kneejerk selling on news like election results, it isn't anything worrisome. But when there's a large, two-day waterfall decline and a close at the lows, it is something to worry about.

The character of the market action since the election is reflective of a major mood shift in the market. We have always had this list of worries about things like Europe, poor earnings and the fiscal cliff, but now the negatives outweigh the positives and old saviors like quantitative easing have lost their power.

Ironically, the biggest positive is that things are becoming so gloomy. When it's this negative, we see capitulation and washouts. Typically, major market bottoms come with a whimper and not a scream, but intense selling often leads to a tradable bounce.

It isn't my style to try to catch market bottoms, but it's hard not to wonder when we are going to see some sort of relief bounce. It's been a while since we have had selling of this intensity and this much technical damage, and the fact that the once mighty Apple (AAPL) is leading the carnage gives the action a much different feel.

Again, I remind you that the trend is your friend and there is no doubt about the direction of this one. Stay cautious.

Have a good evening. I'll see you tomorrow.

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