Forest Vs. Trees–Another Day

Random Thoughts

Trading, like life, has to be taken one day at time (stop me if you heard that before). On Friday, the Ps had a decent day, gaining nearly ¾%. This action puts them right back above their 50-day moving average.

The Quack still looks much better. It gained nearly 1%. This action puts it near its multi-year highs.

That was Friday, now we have to deal with Monday. And, so far, it doesn’t look too good. Futures are getting whacked pre-market.

Looking at the forest vs. the trees, not much has changed. Net net, the Ps are trading where they were over 4 months ago. The big blue arrow points sideways. I also still remain concerned about the May/August/September triple peaks.

Bigger picture, the Nasquack remains in a longer-term uptrend. See Friday’s column for a discussion on using the 50-day moving average as a reference.

Back to the trees and you’ll see that the Quack has traded mostly sideways for nearly 3-weeks.

Not much has changed. It still remains a tale of two markets. As a general statement, the big cap stocks as represented by the S&P have lost momentum but technology and smaller cap stocks as represented by the Nasdaq remain in uptrends.

The Ps still look a little toppy and are sideways at best but they haven’t tipped their hand to a rollover just yet.

The Quack is hanging in there but has lost some momentum short-term.

So what do we do? The plan remains the same. When it is mixed like this, you have to be really selective. Pick the best and leave the rest. On the long side, look for stocks that are trending, trade cleanly, and are (obviously) set up—see last Thursday’s webcast for a lesson on stock selection. Also confirm that their representative sector is also rallying and that stocks within that sector are also trending. On the short side, again, I think it is too early to go crazy bearish. Do keep an eye out for the aforementioned big cap stocks that might be losing steam. Previous high fliers could be priced for perfection and could quickly become a source of funds if the market begins to rollover. No matter what you do, continue to wait for entries. That, in and of itself, can often keep you out of new trouble. Above all, honor your stops on new and existing positions just in case the market fails to follow through.
Best of luck with your trading today!

Dave