A trader's outlook; taken off internet;
SEASONED VETERAN I FOLLOW; The market was run over by the ugly truck today, but the iShares Russell 2000 ETF (IWM) was close to unchanged for the week and the senior indices lost less than 1% since last Friday's close. It was a quite a roller coaster this week and we concluded it on a very sour note. The Fed received most of the blame for the wild action, but oil, high-yield bonds, currencies and a number of other macro matters also played a role. Despite all the news flow, I believe what was really driving the action this past week were computer algorithms and other strategies designed to trade against the emotions of investors and traders. This is nothing new, but the conditions this week favored even more aggressive trading, which produced major swings. There is obviously some technical damage done by the big reversal following the FOMC news, and the bears are backing up their views with the argument that the Fed's interest rate hike was a mistake and the market reaction shows the lack of confidence in Janet Yellen and her crew. If you are looking for an optimistic view, there are two arguments. First is that this market has had a strong tendency toward quick reversals after suffering technical breakdowns. The reason the phrase "The market has no memory" is used so often is that the bounces tend to come out of the blue. The other positive is that we still have the potential for seasonality to kick in. Strength to end the year is a tendency and not a certainty, but this ugly pullback may actually produce a good setup for a relief rally to conclude the year. I'm positioned very defensively and am not anticipating anything at this point. I'll be looking to jump in some bigger-cap names like Facebook (FB), Microsoft (MSFT), Alibaba (BABA) and Google (GOOGL) at the first sign of some upside momentum, but I want to see that positive price action first. The mood out there is quite grim, and that may be helpful, especially if more folks give up their hope for a bounce. A gap down open on Monday may be give us a repeat of what happened last Monday, but even the dip buyers may be a bit more nervous and uncertain now. Have a great weekend. I'll see you on Monday.