The Sky Is Not Falling

Random Thoughts

The Ps were soft on Monday (-¼%) but so far, they only appear to be pulling back from their recent breakout.

The Quack was hit a little harder (-.44%) but it too only appears to be pulling back.

The Rusty (-.81%) was a bit of a disappointment. It started strong but ended weak. This action puts it back to its prior breakout levels, circa 114 in the IWM.

The prognostication continues. “The market is off to a bad start for 2014.” Simmer down now. We are only going into the 7 day of the new year and 3 of those days the market was closed. Prior to that, the market ran up and so far, basis the major indices, it only appears to be pulling back.

The sky is not falling.

It’s important not to get caught up in the fluff. Study your charts. As long as the recent breakout holds, then the uptend remains intact. If the market comes back to its prior breakout levels, then we’ll have to reevaluate. I know you’ve probably never heard me say this before, but, take things one day at a time. Do this and your life will get a lot easier. Heck, that goes for life and the markets. Tomorrow will have its own concerns. Let’s focus on today.

Considering the above, things are getting a little mixed internally. As mentioned recently, its times like these that you have to pay attention to possible sector rotation. Retail, for instance, sold off hard on Monday and is now back into its prior base. Transports, Banks, Consumer Non-Durables, and several other areas have formed similar patterns. It is not the end of the world. A few big up days would put these areas back to new highs. In the meantime, you might want to take a “show me” attitude.

Energies still look questionable.

Metals & Mining also look questionable. The stronger areas here such as Steel, Copper, and Aluminum got whacked on Monday so you might want to wait for upside follow.

Speaking of the metals, it still appears that the Gold & Silver are in the process of bottoming. Both could form bullish Bowties from multi-year lows. Again, it might be more of a process than an event so let’s not start kissing each other just yet.

Overall and in general, things still look pretty good. Most other areas, like the overall market, have only pulled back so far.

So what do we do? I am still not seeing a whole lot of new longs setting up just yet. I would imagine that we’ll see more and more as long as the market can hang in there. In the meantime, continue to focus mostly on existing positions. Honor your stops and take partial profits/trail stops as offered. Continue to avoid new positions on the short side as long as the indices remain above their prior bases and just shy of their prior highs.

Futures are strong pre-market.

Best of luck with your trading today!

Dave