Updated from March 6 to correct first name of American Eagle CEO.
The major U.S. equity indices finally suffered through a good old-fashioned sell-off on Tuesday, the first one of 2012. The reasons behind the rush for the exits again were rather vague. A recession for Europe has long been in the mix for market prognosticators, and the idea that everything was going to go smoothly with Greece when nothing has since the country entered this bailout phase was pure fantasy.
What's more interesting is that the bulls blinked for the first time since this rally began in earnest. Wednesday's session could shape up to be a real test, and at least one trading veteran thinks more pain lies ahead."[B]e aware that the sellers are just now grouping, and they are frantic to figure out what's causing the real weakness, but in the end they will just sell first and ask questions later, because the charts are broken and the money's not flowing in," wrote Jim Cramer in commentary earlier Tuesday. It's a fair point. There have been plenty of calls for a pullback in the past few weeks, but few of them were based on any fundamental concerns. It was more that stocks had come up so far so quickly that a stretch of polite selling would appreciated, if only to appease the chart watchers. Now, all of a sudden, the landscape looks shaky. What if Greece really does default? Will higher gasoline prices knock the economy for a loop? How much higher can Apple (AAPL) reasonably be expected to run in the near-term? Will the banks be sideswiped by the stress tests? And on and on. The thing is, when sentiment turns, there always a few ready-made reasons floating around to be nervous. And those negatives can seem downright ominous when the choice is between riding things out when the trading screen is literally drenched in red (decliners outnumbered advances 10 to 1 on the New York Stock Exchange on Tuesday, the ratio was more than 5 to 1 on the Nasdaq) and taking the profits you already have.
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV