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Market Finds an Excuse to Sell Off but It’s Really the Technicals

Many stock market pundits look for cause-and-effect relationships when describing what is happening to the indices. There was bad trade news and therefore the stock market is down. While there is some loose correlation between news and stock market movement, it is the technical conditions that really determine whether the news is good or bad.

This market has been looking for some good excuses to selloff from some time now. It had become grossly overbought as a friendly Fed and endless promises on China trade gave the bulls ammunition. Whether that news flow was accurate or not was secondary. It was treated as positive and that was sufficient to drive things to all-time highs.

Now that the corrective action is taking hold, news is that the Dec. 15 tariffs will stay in place and there may not be any trade deal in the near term. This is not something that is a shock to most informed market players. Many pundits have been predicting this for a while but the technical conditions were ripe for a correction and the news flow is the easy explanation for it.

The important thing to keep in mind is that this is technically driven action rather than news-driven action. Nothing new has really occurred. The market is simply undergoing some normal selling after a strong run. How it will develop from here is not clear but this action is almost too obvious and normal to persist for long.

This is the sort of market in which active traders should shine and produce strong relative outperformance. New opportunities are developing and there are some nice rotations into groups such as gold and gold mining taking place. My Stock of the Week, SSR Mining (SSRM) , is acting very well.

I made a new buy this morning of Enphase Energy (ENPH) , which is in the solar sector and has a recommendation from Goldman Sachs. I'll be looking to put cash to work on an incremental basis. I've reduced my index hedge, ProShares UltraPro Short S&P500 (SPXU) , and will look for additional trades as it develops.

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