Last Friday, I discussed how a strong move on unsurprising news about a budget approval in Congress, was similar to what happened on March 1 when the market had an euphoric response to an unsurprising speech by President Trump.
Several days later this comparison is gaining further strength as the selling has accelerated.
Back in March, this short-term top led to a six-week long pullback. The market regained its footing in late April and new highs started occurring again in May. For a while, the bears were declaring that the Trump rally was dead and that a major top had occurred.
Conditions this time are quite a bit different. First, we are in the middle of earnings season and that is going to be the primary factor moving this market later this week. Second, we are entering peak positive seasonality -- and given the extent to which many money managers have underperformed, you can bet they will be anxiously chasing some gains into the end of the year.
Before we grow too excited about finally having a real pullback to trade, we have to consider that we have seen many other "one and done" days in the course of this long uptrend. The bears have been pathetic at producing downside momentum, which is due in large part to the strength and tenacity of the dip buyers.
I'm always excited about the potential for some new trades when we have selling like this. Many good stocks are unfairly punished in a slaughter, and the trick is to identify them and then stalk some good entry points. I already have a few on my radar, such as Lumentum Holdings Inc (LITE) , Sarepta Therapeutics (SRPT) , which reports tonight, Flexion Therapeutics (FLXN) and Qudian Inc (QD) . I'll be posting more ideas very soon.