The corrective action that has been percolating all week picked up some traction into the close on Friday.
It was a classic situation of a gap-up open and then aggressive selling into the close. As I've been discussing, market turns are often marked by intraday reversals. The buying interest fizzles out, and then the desire to raise some cash takes hold. All four trading days this week saw that dynamic take place.
The business headlines will provide a variety of explanations for why this selling is taking place, but the best explanation is that it is just the normal ebb and flow of the market action. The indexes and many stocks have enjoyed a very good run lately, and now they are resetting. It is well known that September tends to be the weakest month of the year, so why not move to the sidelines for a while and wait things out?
While is it possible that this selling turns into a deeper pullback? There are no signs yet of extreme pessimism. Breadth was 2,500 gainers to 5,500 decliners, and new highs to new lows were 190-60. Those are not terrible numbers and reflect the fact that there still is some underlying support out there.
This sort of corrective action is necessary action. So stay patient and let it play out. The good news is that it will create a new crop of opportunities. We will soon be heading into third-quarter earnings reports, and the period from late October to early January is typically the best time of the year.
My shopping list is developing well, and now is the time to track opportunities closely and be ready to act as the charts find support.
Have a great weekend. I'll see you on Monday