Downside selling momentum continues to build as the market struggles to price in the China trade issues. On top of that, poor guidance from Intel (INTC) , difficult technical conditions and negative seasonality is creating a perfect storm for more downside.
Breadth is running 1,300 gainers to 5,500 decliners and the number of new 12-month lows is at 130 versus 70 new highs. The one bright spot is precious metals and a few other plays such as Roku (ROKU) and Control4 (CTRL) .
The selling is becoming extreme enough for some sort of algorithm driven bounce to occur soon, but it is tough to time and may not last for long.
The big question is what happens next on trade. If there is no progress in the next two days and talks come to an end without a schedule for future negotiations then the selling is only going to worsen. While I don't think this is the likely scenario, the market is acting as if that is a possibility.
I believe the more likely scenario is that there is an announcement that some progress has been made and that negotiations will continue. The new tariffs and China's response will stay in place but there will be some hope a future deal is still likely.
If that happens, we should see a substantial bounce. How well it holds is another question, though.
I've had a few more stops trigger, so my cash level continues to expand. I always start to get excited about the potential for new opportunities when the market is acting this way when I have a lot of cash on hand. It is just a matter of staying patient and watching for setups to develop.