Stock Market Analysis August 27, 2013

Morning Stock Market Thoughts For August 27, 2013

— Futures are decidedly lower this morning. And they show no sign of looking up, as market participants try to understand the ramifications of war. At first, glance this is decidedly “risk off.” But is war really a bad thing for stocks?

It looks that way for now. And interestingly enough on the currency front, The Japanese Yen is looking strong as capital moves to safer grounds, consistent with a reduction in risk. Emerging markets have been getting hammered, especially middle eastern stocks.

Combine all of the above with a possible reversal in housing stocks, and it’s hard to get too excited about the state of the markets. Home prices increased in June, but will it be enough? The always-insightful Cain Thaler thinks housing is a dead end. And he puts a pretty compelling argument together, too.

Trading Thoughts On Stocks I’m Watching Today:

I’m hoping that my stocks will be insulated from the morning sell off due to their “margin of safety.” All the stocks I own are at reasonable P/E’s and trading near or under their intrinsic value. On the other hand, investors can get quickly get irrational, especially when

As usual I’ll keep an eye on the IWM, SPY and ITB intra-day candlesticks this morning, while watching the action closely for hints and clues. XOM looks ready to keep rolling over and CAT looks weaker than ever. Maybe war is just what these large-caps need. I’ll continue to take things one day at a time and watch the stock market patiently for the first 45-60 minutes to see if a trading range establishes itself.

Other Thoughts and Good Articles I’ve Read Today:

— Cain Thaler asks “Since When Is War Bad For Stocks?

— Business Insider speculates on what a strike on Syria might look like.

Bill McBride remains optimistic on the US Economy.

Back with more later

Stock Market Day In Review August 27, 2013:

I warned you…

That was at 10:30am and things only got worse from there! While treasuries were able to muster a bounce, just about everything else was sold off hard. The market tells we’ve been watching lately (namely IWM and ITB) led the way lower, and didn’t stop going down until the close.

So where do we go from here?

Well, as usual it helps to take a step back and get some perspective. For technical analysis I always suggest you watch Chessnwine’s video market recap for a consistent and objective review. In today’s analysis: Pay particular note to the IWM head and shoulder topping pattern and the bearish wishing wedge breakdown in GS that Chess points out. Scary stuff.

So…

I for one am keeping cash levels healthy and sitting on the sidelines.This sell off had teeth and I will wait for markets to strengthen up a bit before catching knives. My SNV position got smoked today and if I’m going to add I want to be careful and patient.

In the interim, I’ll be watching market internals, Scott Bleier’s twitter stream and any other insightful analysis I can find.

What’s your plans as the market pulls back?

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