Three Things That This Market Has To Do

Random Thoughts

Check out my latest article for Yahoo!: The 10 Biggest Myths On Wall Street

As I preach, you have to take things one-day-at-a-time.

On Wednesday the Fed “Left The Faucet On” and the market took off. The Ps and Rusty made all-time highs and the Quack made multi-year highs.

On Thursday the market didn’t do much. Even though I’ve been doing this forever, it still amazes me that the market is off to the races on one day then the next it become a shoulder shrug.

Ideally, follow through would have been nice but sometimes you do get a pause day after a big up day.

As I wrote on Thursday: Follow through will be key. If the indices right back in, then all bets are off. As long as they stay at or near all-time highs, I’m not going to fight it.

So, here are the 3 things that this market needs:

1. Follow Through
2. Follow Through
3. Follow Through

As mentioned on Thursday, “Don’t fight the Fed” is one of the few Wall Street adages that has some merit. True, as mentioned in a recent column, lately you have to wonder what Fed you would be fighting—the “Tap the brakes Fed” or the “Free money, free money, free money Fed.”  (which reminds me of “money-for-nothing and  your chicks for free” whadda ya expect?, this column is named “Random Thoughts”) Well, as usual, take things one-day-at-a-time. Right now, it looks like we are back to the free money Fed. Of course, no matter what, don’t forget to look at your charts. Wednesday was a breakout, Thursday was a pause day, and Friday?

So what do we do? With a flat day, not too much has changed. If you have any shorts left over, you certainly want to honor your stops on them. Trail your stops higher on existing longs as offered. And, look to start adding on the long side but only on setups and entries. If the pause is not just that, then waiting for entries might just keep you out of new trouble.

Futures are soft pre-market.

Best of luck with your trading today!

Dave