A Selloff Follows the Out-of-the-Blue Rally - Not Good

 |  Includes: DUG, QQQ, SPY
by: TraderMark

That was not the right way to follow up a reversal day (Tuesday). To open with strength and close at the low of the day, completely erasing Tuesday's reversal (which was in itself bullish) - not a good thing. That said, as I've been saying We Need Fear, and perhaps the first hints of it are arriving (would coal stocks losing 1/5th of their value in 1 session be a good indicator?)

So we're back here at S&P 1260 where we miraculously rallied off on Tuesday (out of the blue) - of course the market being the wicked thing she is - I was positioned much better for a fall through that level  before the out of the blue rally. So she is being at her most wicked self at this point with reversals left and right. I am reading a lot of frustrated investors/traders on multiple sites so if you are feeling that way, you are not alone. I haven't seen so many headfakes since the Barry Sanders years.

Anyhow, back toTuesday's comments [Could be Panic Time] - if we break that S&P 1260 level, unfortunately the most logical path is a move down to 1225 which would be levels last seen in 2006. The last move down in a selloff is usually the most traumatic, so in case we go there be prepared. On the positive side the generals are finally being shot, group by group. Even Ultrashort Oil - Gas (NYSEARCA:DUG) was working there in the last hour of the day. That is the last group that needs to fall.

For those of you who joined the market in the past year or so, it is not usually like this - in fact anyone who got in between 2003 and early 2007 was saying "this is so easy".... it is never really easy. But this period with five corrections in under 12 months has been especially tough. On the positive side by experiencing this you can chide that newbie investor who shows up in 2010, throws money at anything, makes 20% and claims "this market thing is so easy" etc etc.That's how I felt listening to all the new guys who started post 2000-2002. Always a silver lining.

It's a rough day in what's been a rough week - but only half a day left to go. The harder we fall, the more bullish I am actually getting - but losing money during the (tail?) end of the downfall is never fun. Thankfully we've avoided much of the carnage in June so we're just giving back some gains and buying merchandise that should serve us well this fall and winter.

Disclosure: Long Ultrashort Oil & Gas in fund; no personal position