The marked continued to bounce but again and so far, it appears to be just that–a bounce.
Gold accelerated lower. Again, when gold drops in light of all the (recent) weakness, it suggests a liquidation type of market. Someone (still) needs to raise cash and fast.
Again, most sectors still remain in downtrends. If you look hard, you might find a few that are still in uptrends but if you dig a little deeper, you’ll find that this is likely an aberration caused by one or two big cap issues (e.g. MU in Semis-Memory).
Even though the market continued to bounce, not much changes. So far, the indices, most sectors, bonds, gold, you name it, remain in downtrends or questionable at best. The longer the market remains below the 50 day moving average and below overhead supply (the recent consolidation), the more pressure will be put on those to exit. If the market comes right back, then the buy and hope crowd will be rewarded and will continue to sit on their hands. So, we (still) need a massive rally, and quick.
So what do we do? Continue to keep an eye out for new shorts. Continue to avoid the long side for now–unless you really like a setup and think it can trade contra to the overall market. Manage existing shorts. Honor your stops just in case the market continues to bounce. Take partial profits/trail your stops lower as offered. Honor your stops on existing longs. As I preach, letting the ebb and flow of money management and portfolio management (entries, stops, trailing stops, taking partial profits) can help to keep you on the right side of the market/in the right issues—especially in questionable conditions. If the market goes up, we’ll get stopped out of our shorts, our longs will start performing, and there will be new longs setting up. If the market goes down, we’ll get stopped out of our longs, the shorts will begin to pay off, and new shorting opportunities will present themselves.
It’s not all about up and down though. People often forget about the deadliest arrow of all for the trend trader: the sideways arrow. The market is virtually unchanged for over 2 months. If this keeps up it will not bode well for us. There is some good news though: the ebb and flow will likely stop us out of both shorts and longs. Although painful, we then simply sit and wait for the next opportunity. Up/down/sideways. I think I covered all bases today. You’re welcome!
Come to the chart show today–provided, of course, that you’re not busy saving lives, building buildings, repairing automatic transmissions or doing other great things.
Futures are strong pre-market.
Best of luck with your trading today!