Always Something To Worry About

Random Thoughts

The Quack made it back to multi-year highs.

The Ps are just shy of all-time highs.

So, is this the all-clear?

Well, it’s certainly a positive development and it does suggest that the recent correction may have been just that. There are a few more things to consider.

The Rusty continues to lag. So far, it still has a Witch Hat appearance. And, the Bowtie sell signal from all-time highs still remains in place. It hasn’t really triggered in a meaningful way yet though.

The Quack and Ps made sharp recoveries at high levels. Don’t get me wrong, this is a good thing. My only problem here is that when a market makes a “V” shaped recovery at highs levels, it is very hard for it to sustain that move. The market is already overbought as it approaches its old highs.

Drugs hit new highs before coming back in to end flat.

Biotech also tagged new highs but then came back in fairly hard. Ideally, you would like to see the old highs cleared decisively before a market starts to correct.

Speaking of decisively, the Semis banged out new highs decisively. The “V” shape thing here is somewhat concerning though.

Some areas such as Banks, Financials, and Manufacturing still look pullbacks/deep retracements.

Gold the commodity broke out decisively. The Gold stocks were even stronger. The bottoming process here now appears to have become an event—see recent columns—you’re welcome!

Overall, things have been improving. I suppose the theme of today’s column is that there’s always something to worry about. It just doesn’t seem like an environment where you want to jump right in with both feet. Rather, pick your spots carefully. If you really like a setup, then take it. Just make sure you really like it.

So what do we do? I’m not seeing many new longs just yet. I think this is a good thing because it is a little dangerous buying into this overbought environment. We will likely see another round of setups soon in the Golds. Get ready to get ready here, especially if you missed the first push. I wouldn’t completely forget about the short side just yet. Do make sure you wait for entries in case the rally continues. I would love to forget about the short side for a while but I’m not sure we’re there yet.

Futures are flat pre-market.

Best of luck with your trading today!

Dave