Having the stock market closed on Wednesday didn't do anything to improve the action. It was a horrendous week for stocks with three of the biggest intraday ranges of the year and the total inability to hold a bounce.
What was most surprising about the trading was that neither a more dovish Fed or some supposed progress on China trade negotiations were able to produce positive action. The market has always been skeptical about the likelihood that the China issue would be easily settled but it refused to buy a positive spin no matter how it was spun.
The lack of a positive response to the Fed was of greater concern. If a dovish Fed can't help this market you have to wonder what will. The partly inverted yield curve received much of the blame and there is obviously some big rotations taking place into bonds and out of equities. The dollar actually weakened this week, which isn't something that has happened much but it is a reflection of the more dovish Fed.
The most worrisome thing about this market was that the news flow really didn't justify such poor action. If anything, the news was incrementally positive. However, market players are acting as if they expect a major negative to hit at any time.
This action isn't due to a major shift in fundamentals or outrageously high valuations. While there is some worry that the economy is slowing this is still a very healthy economy with limited unemployment and few signs of inflation.
There are plenty of pundits predicting further downside but that really isn't value added. All we need to recognize is that the action is very poor and it is best to stay defensive. How low we ultimately go will be interesting and will help determine how things eventually bounce, so there is no need to try to predict anything.
The name of the game is to protect capital until the action improves. The action did not improve this week.
Have a great weekend. I'll see you on Monday.