Retail was off to the races on Wednesday and Thursday, everyone was buying. Then, on Friday it sold off hard, erasing all those gains and then some.
The Semis probed new highs early last week but have since reversed and sold off hard, losing 4% of their value in 3 days.
Biotech was rolling over then promptly reversed and has since reversed that reversal.
The more you dig, the more erratic behavior that you will find.
As usual, follow through is key. And, we haven’t seen much.
Let’s look at the overall market.
The Ps (S&P 500) probed up to all-time highs on Wednesday and Thursday. Then, on Friday, they sold off fairly hard. This action puts them right back into a sideways range. This is why we don’t blindly buy on a breakout.
The Quack (Nasdaq) approached new decade plus highs last week but also turned back down. It too remains in a sideways range.
The Rusty (IWM) remains the worst. It sold off fairly hard out of a Bowtie formation (see Friday’s column), losing nearly 1% on the day.
When the market can’t seem to follow through it suggests that there is no serious commitment behind it. Further, the action in the Rusty suggests that stocks in general could be in trouble.
As usual, take things one day at a time. When things aren’t making sense is usually a time to let everyone else fight it out. As mentioned on Friday:
“Remember this: When you are doing nothing, those speculators who feel they must trade day in and day out, are laying the foundation for your next venture. You will reap beneﬁts from their mistakes.” Reminiscences Of A Stock Operator (Amazon link, If you haven’t read it, you should because it contains a plethora of knowledge).
So what do we do? We wait. The market is the not the place to look for action. If you want excitement, go to Vegas or have an affair.* It is much cheaper than looking for the market to entertain you.
Best of luck with your trading (or gambling/affair) today!
*I’m obviously joking above the affair thing…but at least this way you only lose half your money.