Stocks back down on Friday

Sorry I didn’t get a report out regarding the drop on Friday. It seems after such a volatile week in trading the only thing I want to do after the market close is turn off the computer and get to the gym. I’m not quite sure what to make of the action Friday. Bulls could argue that the price drop was not as much as it could have been, therefore maybe bad news is starting to be discounted. Bears could argue that this could be the start of the next downleg. A dow drop of 195 is still a big drop. I’m thinking that some of these trends could be changing. Not the major trends, but at least trends of a corrective nature. I strongly believe that the momentum chasers in the commodity plays are about to be burned in a similar way that they were when they chased the internet stocks prior to the 2000 drop. I still think the stock market and dollar could stop sliding and have significant rallies. My technical indicators are not signalling such a change yet. So far it is just a hunch, but based on extreme sentiment, and that extreme can still last a long time. Nobody knows how far bubbles can get extending until they pop. It might be wise to not be on the crowded side of these extreme trades, or if you must chase momentum, have a close stop or some option protection. Regarding stock indexes, I will have more to say after seeing the action on Monday. A recovery of the drop on Friday would be very bullish. If not, the downtrend apparently is still intact. I’m really sitting on the fence. Bearish sentiment is getting too extreme to not expect some sort of bounce to cure that extreme (imho).

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