Feeling Cocky? Don’t Worry, It Will Pass

Image source: Big Dave’s office. Yes, I have stuffed rooster in my office.

Random Thoughts

I often talk about the significance of a Bowtie coming off of all-time highs. Not all Bowites (or other transitional patterns) will turn into a major top but all major tops will have a Bowtie (or other transitional patterns). See yesterday’s column “You Might Want To Write This Down. ”

Well, yesterday the market began to tank.

The Ps lost over 1 ½%.

The Quack lost over 2%.

The Rusty was the biggest loser. It lost over 2 1/3%.

There was virtually no place to run and no place to hide. Only a handful (literally 4) out of the 239 sectors that I track daily ended higher-and not by much.

So, is this the end of the world? I dunno. It doesn’t look pretty. It looks like the concerns that I have had such as potential double top and Bowtie are playing out. You know me though. I’m a one-day-at-a-time kind of guy.

You might think I’m felling smug because I saw this coming. Well, I was. If fact, yesterday I thought what a genius I am as I watched the market tank while the only green on my screen was my gold and silver stocks. If there was a way to high five myself, I would have. Pride goeth before the fall. After their initial rally, even they got whacked. Humbling.

If you ever meet someone in this business that isn’t humble they either don’t know what they are doing or are delusional.

As far as the market fall, I would have preferred to be wrong. I’d much rather play the long side. In this business though, you have to play the hand that is dealt. If that means shorting, then you short.

So what do we do? With the few exceptions of selected Gold and Silver stocks, I’d continue to avoid the long side. I think the damage is done. This market would have to have the mother-of-all turnarounds for me to get excited about buying. On the short side, I don’t think it’s too late. I’d focus on high flying areas that have recently cracked and are attempting to make a new leg lower. Retail is a good example here. Of course, and as usual, no matter what you do, make sure you wait for entries and honor your stops once triggered.

Futures are flat to firm pre-market.

Best of luck with your trading today!

Dave