Major averages finished lower on mixed volume. So far no bounce has materialized. The NASDAQ Composite and NASDAQ-100 attempted an undercut and rally on Friday closing just above where they attempted a bounce. This is a sign of weakness. Further, the small caps Russell 2000 is below its 200-day moving average having reversed its gains since the start of the year. With the majors trading below critical moving averages, this downtrend could continue despite the pronounced effects of QE which had helped to create shallow floors in the market.
President Trump has made little progress on his pro-economic reforms. Tax reform and infrastructure spending have both been delayed so probably won't come until 2018. A growing lack of confidence in his administration, in the Federal Reserve, and in any recovering economy is a major market headwind.
Further, our Focus List has materially shrank and is a good barometer of the health of the market. You can also let your stocks tell you what to do. In general, if you see a growing number breaking down and/or hitting your sell stops, that's a red flag. Given the recent market weakness, many if not most of your stocks have probably pushed you into a high cash position in your portfolio. Be on the lookout for possible undercut & rally formations which have been discussed, but also keep stops very tight should you initiate any long positions since markets may continue to slide.
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