The Daily Read

New title, same stuff - just not twice a day anymore. Here's what I'm reading tonight.

• Stocks tumble; Dow drops over 200 points - WSJ
• Cotton traders wonder: how high is too high? - WSJ
• Is the PBOC driving up the euro? - Alphaville 
• Distributed generation: devolving power - Economist 

"I am certain, however, that nothing has done so much to destroy the juridical safeguards of individual freedom as the striving after this mirage of social justice."

- Friedrich Hayek

If you have read the papers (that word almost demands quotations nowadays), you have undoubtedly read that concerns over China, the next US catalyst, and persistent emerging market fears are to blame for today's sell-off. Poppycock, all of it.

Today the S&P 500 let go of 21.86 points to settle at 1,846 - a decline of 1.17%. This is hardly "fear" or "panic" selling. In fact, traders are taking some profits. In my weekly research note (written and distributed every Sunday), I warned traders to be cautious in initiating new long positions. I did this simply because it is time for a breather - no one sprints a marathon.

Today's action saw steady and persistent selling, after a slight gap-up open, on solid volume. There were no "come to Jesus" moments; no 15-handle 5-minute candles on the charts - just a slow, steady move lower. Consider the chart below.

The upward trend in the SPY is in tact. I will not start to become worried until we see a test of the 180 level and a move lower (accompanied by some volume).

In terms of my current positions, I am cash-heavy at the moment. My TSLA and SCTY positions were stopped out for a small loss yesterday, and I removed my APR calls in POT on Monday. The only trade I have on at the moment is my GDX synthetic covered call and it is working out quite nicely, in no small part due to the upside seen in spot gold. To avoid getting whipsawed around, I am going to refrain from adding long exposure (at least in the near-term) until we see some support. The 50-day moving average in SPY is around 183 - I would like to see that level (at least) reached and held before I start snooping around for longs again.

In the meantime, maybe there is a short or two waiting to be found. More on that tomorrow.

Heads, ignore the pundits. Tails, ignore the pundits.