Wish I would have bought into that friday morning, I was up 15% on the year on friday morning, now only up 8, as im in some leveraged bear ETF's, but i think that was a fairly typical friday long weekend short squeeze, I expect the selling to resume mid next week some time.
Been though this so often and read history, market taking a break but should resume upward move. Like in July 2007 market made a high took a break then highs in October 2007, I not seen in past where markets don't show it hand before ending all time highs. Matter of fact, I think lowering of commodity prices going down and especially crude oil prices will cause boom in USA for people to want to spend much more, going to the pump and saving over 50% then what use to be paid certainly helps all have more money, less spending on trucking, more money in hand, people will spend more. Close below of ES 1813 would make me change opinion.
I think the drop in crude prices will be good for the economy eventually but energy stocks make up a third of the sandp, and half of all jobs added since the recession are in the oil and gas industry, short term it will be bad for us, lots of people are going to lose their jobs with 45$ oil. It It is going to take time for 45$ oil to be reflected as a positive for the economy.
Except for less exploration of oil, people will now use more supply of gasoline, expand their travel to include air if airlines start lowering passage. Eventually much more supply will be used up and start seeing prices go up, I am not buying there will great deal of layoffs, our country doesn't change radically as far as people needed to produce what we need and use. Companies that wholesale gasoline will most likely be making more. It is a good thing to shake up companies, they get to see waste within their companies, streamline, often time way over on needless management. They have gotten way too fat from the public. Often times when one industry loses, others start becoming better. But let's compare charts, Oil is plunging and yet when you look at Exxon and Chevron they are not.
I don't think exxon drills and owns all the oil they use, they are also a buyer. So they live in a band. Too high and it starts eating into margin.
Long term, I have started buying Crude Oil and hedging of course, have no clear idea if at lows, but clearing looking at nine year charts, lows might be in since heavy volume has really showed up.
I'm a technical trader, so I wait for a high probability trade signal (80%+) based on historical testing and apply a position size according to the money management criteria. The trade will have a strong volatility or directional bias based on my research or I won't trade. If this is a transitional period, many get caught in bear traps at this time, hence it is a low probability trade (by my research). Hence I would stay out now, although I have one bullish trade (3 weeks old) on the table which comes from a system which has been 100% accurate this year. If it is wrong no biggie as it is only 5% of my trading capital. If one is asking other traders if he should trade, he does not have a system or does not trust his system. I would suggest instead developing a high probability system based on research (not computer backtesting) and develop a level of confidence and specific trading entry/exit signals sufficient to pull the trigger.