Why Fight It?

 | Nov 14, 2012 | 4:18 PM EST
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Even if you have been respectful of the market downtrend, the selling is not moving to the point where it is becoming downright disgusted. Once again, we had a slightly positive open that provided false hope for the bulls, and then it was just a steady stream of selling all day. We couldn't even manage a decent intraday bounce. The selling became even worse following the president's press conference.

Unfortunately, there isn't any positive news that can be used as an excuse for buying. The fiscal cliff is far from any resolution, the issues in Europe continue to worsen and hopes aren't very high for the next quarter after a lousy earnings season. Even the Fed has been rendered impotent now that it has used up its QE bullets.

The bull's best argument isn't a very good one. The hope is that we have gone down enough to make stocks a good "value." Unfortunately, market players don't think that way when we are caught in a nasty downtrend. The focus is on growing losses and the idea that a stock may be cheap provides little comfort. We all know that cheap stocks can become even cheaper.

I've been saying for a while that we should respect the trend and just stay out of the way. Let the geniuses in the media make the bold bottom calls. Our job isn't to be sensationalistic but to protect our capital and look to make money when the conditions are in our favor. Those conditions simply don't support buying right now, so why fight it?

The bounce buyers will be looking very hard for some excuse to jump in as we become increasingly extended to the downside. Look for a trade if that is your inclination but don't lose sight of the big picture. We continue to break down and there is no reason other than hope to believe that it is about to end.

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

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