STOCKS DROP LIKE FLIES

On Monday it was a great sell off in all sectors again. The leading sectors are performing horrible and some defensive are doing better. The rotation just got started, which is not a good sign. The big picture doesn’t look good. The Nasdaq which usually needs to be the flagship did the worst performance yesterday with -1,20%. Biotech and internet stocks were the biggest losers. Out of the last 10 days the Nasdaq dropped 6 days. It is not a bullish market anymore.

• Dow16,277 -26 0.16% 
• Nasdaq 4,226 -51 1.19% 
• S&P 500 1,857 -10 0.51%

Last Friday US markets made a bearish reversal day as prices opened higher and made a new high, then reversed to close lower. That was only a bull trap. Finally, it made a double top pattern which makes me Hmmmmm... Normally a day like that has some follow-through on the sell side and it happened yesterday. The outlook isn’t rosy.

The huge intraday volatility has occurred in the last couple of weeks, which means the market is pretty nervous, there is great fight between the bulls and bears. Plus the yo-yo up and down movements proves clearly the long side momentum has weakened pretty much in 2014. This year it is impossible to make more than 10% yield on SP500.

Now our expectation is that we will continue to the downside and anticipating some larger correction down to 1,700 territory.

The BFM Assets Team.