I was just looking at yesterday’s column. It’s a good thing that it is named Random Thoughts.
My point is that if a bear market is coming, then it’s coming. Worrying about it won’t help.
This doesn’t mean that you can’t take action. As I preach (after all, I am the lead pastor at www.thechurchoftrendfollowing.com), letting the market make decisions for you through proper money and position management will help to keep you on the right side of the market. Stops will knock you out of longs as they become victims or, in some cases, will keep you in the stocks that somehow defy gravity. Waiting for entries can often keep you out of new trouble—regardless of the side you are looking to play. Listening to the database and being selective really helps too. If you are seeing mostly shorts and you really like some setups, then take them–and, obviously, vice versa for the long side. Just make sure the setups are really that good. In Italian, there is a word “perfectissimo” which means the most perfect. Make sure your setups are perfectissimo.
One thing to remember is that it’s not like a switched will get flipped from bull to bear. And, then you’ll know for sure to only short. Again, just let the portfolio ebb and flow guide you.
Now, let’s look at the market.
The Ps ended off their worst levels but still lost nearly ½% nonetheless. This action puts them even further below their 50-day moving average. Again, there’s nothing magical about “da fidy” but it can help to keep you on the right side of the market. Ideally, I’d like to see it snap right back above it as it has the last year or so. Net net, the Ps haven’t made any forward progress in nearly 2 ½ months.
The Quack played catchup on Tuesday. Although it still remains much more constructive than the Ps, it now is getting hit hard. It lost over 1% and this is enough to put it back to its fifty. Longer-term the strong uptrend remains intact but it sure would be nice if the shorter term slide is the index only coming down to “kiss the M.A. goodbye.”
The sector action is abysmal.
Many areas that were just recently at new highs have sold off hard—enough to make them look like more than just pullbacks. These include, but unfortunately, are not limited to Conglomerates, Manufacturing, Banking, Media, Leisure, Insurance, and Chemicals.
Stronger areas like Drugs so far only appear to be pulling back but it has to stop soon.
Recently weaker areas like Retail and Consumer Non-Durables continue to slide.
Gold still looks like it is putting in a major bottom but so far, it appears to be more of a process than an event.
So what do we do? I think the plan remains the same. As mentioned above, honor your stops. That will help to keep you in good stocks and will take you out of bad ones. Be selective. We are not in that type of market where even a monkey throwing darts wins. Wait for entries. Not to beat the dead horse, but that in and of itself can often keep you out of new trouble.
Futures were strong pre-market but have deteriorated.
Best of luck with your trading today!
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