The Three Things That This Market Didn’t Do

Random Thoughts

On Friday morning, I said that there were three things that this market had to do:

1. Follow Through

2. Follow Through

3. Follow Through

And, on Friday it did not do any of those three things.

The Ps have now given up nearly all of their Fed day rally. I ignore all news but I do know when a market rallies on good news but then gives up all of its rally it suggests that that news has been quickly digested. If fact, there are trading strategies based on such news reversals. You look to buy after bad news and sell after good news (write that down).

1700 is a good inflection point in the Ps–not a line in the sand, but a good reference point. If they can stay above it, then their breakout remains intact.

Speaking of breakouts, although the Nasdaq dipped on Friday, so far, its breakout remains intact. 3700 would be a good inflection point here.

As I preach, you have to take things one-day-at-a-time. Sometimes markets are prone to fits and starts. However, until the market does any of the aforementioned three things, I would remain a little cautious. Said alternatively, show me.

So what do we do? Friday was a day where it was good to have some leftover shorts hanging around. It helped to smooth out the bumps a bit. This is why I let the market take me out of positions and I don’t just cash out of everything just because the overall market does (or fails to do) something. With that said, honor your stops on any existing shorts. And, for that matter, honor your stops on any longs just in case. As far as new longs, I would only take new setups if they past the “really really” like them litmus test and/or if they are commodity related stocks that can trade contra to the indices. I have one of both that I’m looking to trade today. See today’s service for the symbols (I know, I am such a tease!). No matter what you do, as usual, wait for entries. As I preach, this can often keep you out of new trouble.

Futures are soft pre-market.

Best of luck with your trading today!

Dave