The Key for Investors Right Now: Patience and Cash

After the ugly action, the market saw on Tuesday, a reflex bounce is not unusual. Stocks did bounce a limited amount early Wednesday, but it fizzled out as the day progressed, and most of the indexes closed with small losses. Breadth was around 4,000 gainers to 5,200 decliners, but it was weak action with 250 new 12-month lows.

Back in early August, the market came roaring back immediately after a growth scare, but the JOLTS job openings data released Wednesday morning show that employment is cooling. The numbers aren't severe enough to suggest a recession, but the jobs report on Friday will be of great interest. The Goldilocks economic scenario is being questioned, and the bulls are nervous.

At this point, we have to watch for failed bounces and lower lows. Downtrends develop when bounces fail and prior lows are undercut. The longer that action continues, the less confident the dip buyers will be.

Technically, the S&P 500 still holds above its 50-day simple moving average, but there is a large gap in the chart under that level, which will act as a magnet down to 5460. That would be the short-term bearish target.

In addition to the deteriorating technical picture, there isn’t any other immediate catalyst on the horizon other than the jobs news Friday, and then the Fed rate cut decision on September 18. Meanwhile, market players have to contend with gloomy seasonality and struggles in the Magnificent Seven names.

The good news is that healthy corrective action will lead to a new crop of opportunities. There are many stocks with solid fundamentals that are building a technical foundation for better action later this year, but the key right now is patience and cash.

Have a good evening. I’ll see you Thursday.

At the time of publication, Rev Shark had no positions in any securities mentioned.