Dave’s Favorite Dead Horse

Random Thoughts

Well, I hate to keep beating the dead horse on the follow through thing but lately, we still haven’t seen any.
The Ps continued to drift lower. They didn’t come unglued but at these levels they are below their August peak and right at their May peak. So, net net, they haven’t made much forward progress in over 4 months.

Shorter-term, again, the Ps have taken out their Fed day low. This brings to mind Monday’s “write that down” moment:

“I ignore all news but I do know when a market rallies on good news but then gives up all of its rally it suggests that that news has been quickly digested. If fact, there are trading strategies based on such news reversals. You look to buy after bad news and sell after good news (write that down).”

On a positive note, the Ps remain above their 50-day moving average. As I preach, there’s nothing magical about this but it can be a useful reference point.

The Quack still looks better than the Ps. So far, its recent breakout remains intact and it has only pulled back. However, ideally, I’d like to see some follow through here too.

I don’t focus too much on the Dow but I do occasionally take a peak. Right now it appears to be forming a triple top. It also closed below its 50-day moving average. This is a good example of why I do not like “V” shaped recoveries at high levels—some fodder for today’s chart show.

So, once again, the Ps (and Dow) still look questionable at best but the Quack looks okay.

So what do you do when the market is mixed like this?

Well, with only a modest change in the market (basis the Ps and Quack), not much has changed:

Continue to take what the database is offering. If you really like a setup, then you take it. Just make sure the underlying sector is also trending.

On the long side, I am still seeing some setups in Technology. I suppose this isn’t a shocker since the technology filled Nasquack has been the best performing major indices.
Outside of tech, I like selected Metals. The great thing here is that can trade contra to the overall market. So, if you get that piece wrong, sometimes you’re still rewarded nonetheless.

Also, I still like Leisure since it has been in a solid uptrend as of late. Wait for entries here though since it got whacked a bit on Wednesday.

Again, I’m starting to see a few shorts setting up in big cap issues that were previously trending. I suppose this is no surprise when Ps themselves haven’t made much progress in quite a while.
So what do we do? With things mixed, I think you really have to listen to the database and take only the best of the best setups. And, right now I’m seeing setups in those aforementioned areas on the long side and a few areas on the short side. Therefore, I’m going to look to put on some new longs and new shorts. By waiting for entries, I’m going to let the market trigger me in. And, once in, I’m going to let protective stops take me out of those positions if I’m wrong and trailing stops keep me in them if I’m right. Pick the best, wait for entries, use stops. It’s all pretty simple actually. Notice I said “simple” and not easy.

Futures are firm pre-market.

If you’re not busy saving lives, building buildings, or doing other great things like repairing automatic transmissions, then come to the chart show later today. I offer a 100% money back guarantee if not completely satisfied for all that attend (and in the last decade or so I have not had to give one refund!). Wear light-colored loose fitting clothing, drink plenty of fluids, and bring your questions & favorite trending stock picks.

Best of luck with your trading today!

Dave