Brief thoughts in the midst of the market rout

We seem to be in the midst of a correction that should take 4-6% off the SPX. Hopefully, you were following my advice and raised cash into the strength. My portfolio now has more than 50% cash, but even a few stocks I own hurt on the days like today. The sentiment is changing, we are not seeing as much buy on the dip mentality, especially in some of the more riskier equities, emerging markets, or commodities names. At the same time, the negative news flow is mostly coming from the outside of US, while the economic data here is decent, and actually is neutral to positive. But the market is nervous after a big move and consolidation is not surprising. The earnings and guidance from most companies was good and economic news have been steadily improving. The first support on SPX is at 1170,near 50 day moving average and we are only 6 points away a I write this. The momentum indicators are getting close to oversold levels too, and it would be interesting to see if we turn there. If the 50 day ma doesn't hold (many stocks already broke that level)we should see the support at 1150, which would be roughly a 6% correction from the recent highs.

European events still dominate the investors psyche, concerns about overheated China other emerging markets, and corresponding run to the safety of the USD, all of this needs to be considered. What must be understood as well, is that with a skittish markets and the path of least resistance being down, any catalyst could really be blown out of proportion. If you are fully invested, its won't hurt to tighten your stops and raise some cash, only if to deploy it it aggressively when the markets stabilize. Its easy to get caught in the emotions of the day, but trying to maintain some perspective and having a strategy would get you through the craziness.

My strategy is to start looking for names that are being thrown out with the proverbial 'bath water', while at the same time to be mindful that not all sectors will be back hitting new highs in the near term. Generally, for now, I plan to focus on defensive names, avoiding controversial names like GS, BP, RIG, CAM, etc, although I may buy some stocks that unfortunately got caught in these highly publicized events and were sold in sympathy.