The Ps had a decent day, gaining nearly ½%. This action has them just shy of all-time highs. This, as Martha would say, is a good thing. Net net though, the index really hasn’t made much forward progress in over 4 months. Plot the Ps and notice that they are just slightly above their May peak.
Ideally, you know me, I’d like to see them blast higher and not look back for a while. This would negate the potential top(s) and other things that I have been concerned about such as the “V” shaped recovery at high levels.
The Quack is a different story. It gained 3/4%. This action has it closing at multi-year highs. So far, its minor breakout remains intact.
Internally, things are a little mixed. Many areas, like the Ps, have formed “V” shaped recoveries. This doesn’t mean that they can’t continue higher, it just suggests that they are already overbought.
As you would imagine based on the Quack’s performance, there are selected technology areas such as the Semis and Biotech that are making new highs/closing highs.
I suppose the elephant in the room is the Fed. I think I liked the old secretive Fed much better. The one where you would find out in a report what they did 6-months ago. I am a chart dude, so I don’t want to digress too far. With that said, I think the Fed has painted themselves into a corner with the free and easy money. Now they have to figure out a way to back off without upsetting the financial markets—to avoid the proverbial “Tootsie Roll” in the punch bowl. Good luck with that.
When the market is in a rip roaring bull market you just go after most anything that’s trending. Life is easy. Unfortunately, we are not in that type of market now. You have to choose your spots carefully. Take things on a setup-by-setup basis. At this juncture, I prefer stocks that can trade contra to the overall market and/or those that appear to be in developing trends vs. mature ones. With that said, I’m still seeing some setups in selected Industrial Metals.
Once again, I would be leery of stocks that are in extended trends. This sort of goes against my trend following mantra. My concern with these stocks is that if the market doesn’t follow through, the bigger they are, the harder they could fall. And if the market does follow through, they could become a source of funds. Now, if we get into a rip roaring bull market, then bring ‘em on-the stronger the better.
So what do we do? Again, continue to take things on a setup-by-setup basis. If you really like a setup, then take it. Just make sure you wait for entries. As I preach, that, in and of itself, can often keep you out of trouble. Markets are like life, it’s a good idea to stay out of as much trouble as possible.
Futures are flat pre-market.
Best of luck with your trading today!
Free Articles, Videos, Webinars, and more....