I am not overly surprised at today’s market action. At one point I was down about 1/2 percent, but managed to recover and finish slightly in the positive on the day, and when I say slightly, I’m talking by a razor-thin margin. One disturbing situation though was the heavy selling in the Nasdaq, which far out paced the returns we saw in the Dow, S&P and Russell. But when you dissect the market action, there was some heavy losses in a handful of stocks that likely can be linked to the overall losses of the Nasdaq – in particular, I am talking about Salesforce.com (CRM) down 7.9%, Baidu (BIDU) which was down 4.2%, and the market darling and Netflix (NFLX) down 3.8%. All of these stocks have seen some of the best rallies out of the entire market this year, and today’s selling in those names could probably be contributed to nothing more than profit-taking at this point.
As for the days ahead, I believe this dip will be bought up as it has since the beginning of September. The thought that the bears are going to be invigorated at this point to drive the market lower is far-fetched at best. What they need is a major game-changing event in order to pull that off. Tomorrow we have Jobless Claims followed by the Employment Situation, that could either bolster the market or cause it to see some further selling, but ultimately I believe this rally will get quickly bought up again, and eventually hit the April highs from earlier this year.
As I’ve said many times before, a breakout of 1150 and a push over the long-term downtrend greatly emboldens the bulls to continue buying this market, and with mid-term elections less than a month away, there is no way that the “powers that be” are going to let this market slip at all.
So in the simplest terms today’s doji candle on the S&P should be embraced by the bulls as consolidation, allowing the bulls to take a quick breather before staging its next attempt at a leg higher.