Wait, Don’t Anticipate

Random Thoughts

My mantra is to take things one day at a time. That’s good advice for life and even better advice for the markets. Friday things were beginning to look dubious. Monday was somewhat more of the same. Then, on Tuesday the market had a vast improvement. So it’s all good? No. Again, take things one day at a time and don’t get too caught up day-to-day action. Let things unfold, especially while the market is stuck in a sideways range.

Do keep an eye out for clues but at the risk of preaching, wait, don’t anticipate.

The Ps (S&P 500) put in a solid rally, gaining over 1% for the day. This action has them closing at multi-month highs. It also puts them just over 1% away from all-time highs.

The Quack (Nasdaq) had a decent day too, gaining nearly 1 1/3%. It is now within spitting distance of 14-year highs.

The rally seemed to favor the big cap stocks as evidenced by the Rusty (IWM) lagging. With a gain of over 1/2%, it was still a decent day nonetheless. It is now a percent and change away from all-time highs.

In keeping with the new high theme, bellwether Apple (AAPL) broke out with vigor to close at new all-time highs. This stock is now viewed as a sector within itself.

In this business, if you want to know what’s going on you have to watch everything. And, I do. I’m just old school in that I’m a huge fan of keeping an eye on what happens in the Semis. Yesterday, they broke out of their trading range with vigor. This action has them closing at their highest levels since 2000.

Energies sold off a bit but so far, a bottom still appears to remain in place here. Do wait for entries in light of this weakness. Also, honor your stops once triggered. As I preach, when trading emerging trend patterns you’re like the American Pioneers. You’re either going to get the gold or arrows in your back. The chance for the gold makes it all worthwhile.

Speaking of the Energies, the underlying commodity got whacked here on Tuesday. It’s not end of the world though. So far, it still appears to be putting in a bottom. That’s typical for efficient markets. They have lots of fits and starts, especially at turning points. I’m going to spend a considerable amount of time discussing emerging trend patterns in general and as they relate to efficient markets in tomorrow’s Dave Landry’s The Week In Charts. The show is free and must be good because people often say “It’s good for nothing!”

Gold stocks continued to pull back. A bottom still appears to remain in place here. Just make sure that you wait for entries in light of the recent weakness. So far, I still think I’m right, just early—the story of a trader’s life. If I had a nickel every time that happened in my career, well, I’d have a bunch of nickels, probably around $29.95.

As a general statement, things improved on Tuesday but all isn’t great in the world. So far, the looming continued rise in interest rates is still with us. Bonds basis the TLT lost over ¾%. Utilities and to a lesser extent Real Estate were able to rally in spite of this. So, they’re not coming unglued just yet. Unfortunately, they still look quite dubious.

So what do we do? I think as long as the market remains stuck in a range the song remains the same. Focus on those areas such as the aforementioned commodities that can trade independently of the indices. Continue to wait and not anticipate. Let the market break out of its range and wait to see if it will stick. As trend followers, you’ll always be a little late to the party. The good news is that you’ll save a ton of cash in the meantime. Let everyone else fight it out.

Best of luck with your trading today!

Dave

P.S. For my Italian brethren, I am doing a webinar in Inglese with Italiano translation today. See the countdown in my website sidebar for more information.