What This Market Craves

Random Thoughts

The Ps and Quack had slight gains on Friday. The Rusty did a little better, gaining just over ½%.

Technically, with a slight up day, nothing has changed overall. The S&P still has a big picture top look to it. The Rusty is just below its prior peak. And, the Quack is consolidating after its recent minor breakout.

Now, fast forward to this morning and we have some new information flowing into the markets. The market is all excited because some dude backed out of running for Fed president. He’s known as “Tap-the-brakes-a lot-tagus.” Since this market craves free-and-easy money (and electrolytes*), getting Mr. Tap-the-brakes out of the way is seen as a good thing. Yeah, I ignore all news but you busted me. Admittedly, when the futures are up big, I take a peek to see what’s happening.

Speaking of the news, you can’t trade the news but sometimes you can fade the news. For the aggressive, pay attention to a possible Opening Gap Reversal (OGRe) in the indices. If you don’t know what that is, then please don’t try it at home. See my website for more info and watch the last two webcasts.

Lately, I have been concerned about the “V” shaped recovery in many areas and the fact that a lot of areas were bumping up against their prior highs just like some of the indices. If the futures hold, then the indices and many sectors might just clear their prior peaks.

So, would this be the “all clear”? As I preach, follow through is key. If today’s rally sticks, it would certainly be a good start. As usual (here it comes), take things one day at a time.

So what do we do? I’ve been seeing a few decent setups on the long side lately. It is a little dangerous jumping in on new positions when the futures are up big though. Therefore, be careful buying around the open. Let things shake out a bit and then make the “go” or “no go” decision (see the second half of Layman’s for more on entries on big opens). Honor your stops on any leftover shorts–apply a little discretion if needed (see last week’s webcast on the difference between “discretion” and “throwing caution to the wind”).

Best of luck with your trading today!

Dave

*An obscure reference to a very bad movie-so bad that it is good. Google “crave electrolytes” (without the quotes) if you get bored.