06Aug11:13 amEST

There's Heat Below

A massive upside reversal in the futures overnight may very well have seen bulls breathing multiple sighs of relief. However, it is worth remembering that plenty of opening gaps higher fail during corrective markets. And as we have been profiling, especially since last week both here and with Members, the market has indeed been flashing quite a few warning signs of corrective price action as we work through the often-tedious month of August on Wall Street. 

As I write this, the small caps in the IWM are flipping red. If IWM holds below $148 now, yesterday's lows of roughly $146.20 are certainly within reach for bears to press lower. Should we get close to those lows, I suspect it would mean the senior indices would be suffering major fades, too (they are already well off their morning highs now). In sum, there is plenty of heat below if bulls prove inept at defending intraday fade attempts today. 

Individually, it is hard not to love the Shake Shack action. You are talking about a stock which broke many longs, emotionally and financially, over a period of years from 2015-2017 (as seen on monthly chart, below, the "bull killer" scenario of a multi-year downtrend followed by a long, sideways period of dead money). However, SHAK is surging again after earnings and is up nearly 12% now, threatening to make a run at its post-IPO highs later this year.

Here, again, the temptation is strong to enter into names like SHAK or even the estimable WING, also in the fast-casual dining space. But the broad market is simply too dicey for me to become involved with new longs right now, at least not until bulls can demonstrate they are capable of holding a rally for more than an opening pop. 

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