As a trend follower, follow through is key. Duh! The Ps broke out on the excitement of the Fed leaving the money faucet on. So far though, that has been a one-day wonder. In fact, the Ps have now given up all of the Fed day gains and then some. This action suggests that the news has been fully digested. The market, at least basis the Ps, is in “now what?” mode.
Let’s look at the technicals.
Yesterday I said that “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.” Well, the Ps closed at 1701.84–close enough. It’s not the end of the world but the breakout has been erased. It also puts the index back below the August peak which is just above the May peak. Ideally, you know me, I’d like to see the market clear these prior peaks with vigor.
The Quack still looks a little bit better. It sold off on Monday but it did manage to finish off of its worst levels. So far, its recent breakout remains intact.
With the Nasdaq hanging in there, technology as you would imagine is also doing well. Biotech, Drugs, Semis, and Software remain in uptrends.
The Trannys dipped but recovered to close well. So far, their breakout above their May/August peaks remains intact.
It’s getting a little mixed. The bad news is that at 1700, the Ps have me in “show me” mode. The good news is that some of the other indices are hanging in there and there are pockets of sector strength such as the aforementioned Technology and other areas such as Leisure and Selected Metals.
So what do we do? I know it is cliché but I think with things mixed, we are in a stock picker’s market. Therefore, pick your spots carefully. Pick the best and leave the rest. If it isn’t the greatest setup that you’ve ever seen then make sure that it is in an area such as the aforementioned Selected Metals that can trade contra to the overall market. I don’t see a reason to put on any news shorts just yet. You might want keep an eye out just in case. No matter what you do (warning, sermon coming) make sure you wait for entries and then honor your stops once triggered.
Futures are flat to soft pre-market.
Best of luck with your trading today!
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