The Ps tried to rally but reversed to end down on the day. As I’ve been preaching, they have lost vigor. They have failed to take out their prior peak decisively, forming a potential double top. They are also on the verge of a Bowtie sell signal.
Bowtie sells off of major highs can often signify a major top (write that down). This is because the prior trend suggests that the majority of people are now on the wrong side of the market. Should the signal materialize, those previously long will begin to watch their profits evaporate. This is even worst for the “Johnny come latelies” who find that their new positions are now at a lost. And, this so called “fast money” can often help to exacerbate the slide.
Speaking of Bowties, other major (and not so major) index ETFs have formed Bowties down. The Dow (DIA) and S&P 100 (OEF) are two examples. Study your index ETFs as time allows.
The Quack tried to rally but came right back in. This action has it stalling at its prior highs.
About the only thing I still like on the long side is Metals & Mining, especially the Gold and Silver stocks.
On the short side, I still think the previous high fliers such as Retail could provide opportunities soon. Again, read the “Go Go No Mo” strategy under Education.
The futures are getting creamed pre-market so it looks like we’ll see triggers on the recently and aforementioned Bowties. Be careful trading around the open just in case it turns into an Opening Gap REversal (OGRE)-wait to see if it begins to follow through.
Speaking of follow through, assuming the weakness persists throughout the day, now you know why I have been so cautious as of late. The market has lost steam and the only thing that has glittered is Silver and Gold–A Burl Ives market.
So what do we do? Again, use caution if you’re trying to position in the index ETFs since the futures are so weak pre-market. I’m not a big fan of ETFs but they can help to get you some exposure to the short side while looking to position in less efficient stocks which can provide much better opportunities–see my webcasts, efficiency is a common subject. Yet again, with the notable exception of the recently and aforementioned Metals & Mining stocks, I’d avoid the long side for now.
Best of luck with your trading today!
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