Yesterday’s mini flash crash shows that this market is still susceptible to negative news. A fake tweet about bombing the White House is very unnerving but the immediate reaction of 100 plus plunge is unusual. The correction still has a little way to go before we start the next leg up. The good news is that earnings being reported aren’t as bad as was expected. The problem is that psychology of the market is in neutral so commitment of buyers is still waning. I would like to see a little more negative mood, so that the correction will complete itself and the smart money will come back to the market.
As the sell in May club begins its mantra the market will probably go sideways to see if it really happens. Personally I don’t see much of an effect from this theory, because the economy is showing strength in some very important sectors, such as housing and healthcare. Therefore, volatility has returned and we will experience 100 plus swings as this all plays out. Bear in mind the averages are up 10% plus for the year so a little consolidation is welcomed. Remember trees don’t grow to the sky!