The Only Bright Spot

Random Thoughts

The Ps dipped but recovered to close off their worst levels to end flat.

The Quack also ended off of its worst levels but it still lost nearly ½%.

Since the Fed “faucet” day, the Ps have been in a fairly serious slide, remaining in a short-term downtrend. The Bowtie moving averages (10SMA,20EMA,30EMA, email me if you need more info or come to the chart show today) have turned down and are on the cusp of crossing over. Bowties off all-time highs can often signal major tops. Let’s hope this one doesn’t materialize or if it does, that it doesn’t work.

Intermediate-term the trend remains sideways as best. This doesn’t take a rocket surgeon to determine this. Just look at yesterday’s close and then look at where it was back in May. See recent columns for more on this highly technical way of using technical analysis.

For those keeping score, the Dow has Bowtied down from all-time highs. This is not a Martha market (Martha likes good things).

The Quack has given up all of its recent breakout above 3700 and then some. On a net basis, it hasn’t made any forward progress since August.
Internally, there was still a lot of ugliness. Recently stronger areas like Biotech continued to implode.

Futures are up big pre-market. I avoid all news but I do get some though osmosis. Apparently, they “fixed” Washington again. Yaaah!, I’m going to tell all my friends.

Volatility has certainly returned to this market. See my October 1st column. https://www.davelandry.com/index.php/volatility-ahead/

About the only bright spot at this juncture are the foreign shares. Markets that have been left for dead like Italy and Spain are in uptrends. China has been trending too. You know me, I not a huge believer in the tail wagging the dog (historically, we sneeze and the world catches a cold—i.e. foreign markets are correlated to the US), but I also often believe in what I see and not in what I believe—in this business, you have to.

So what do we do? On the long side, you want to be super selective. Ideally, the issues should have recently demonstrated that they can defy gravity. Right now, I’m seeing a few setups in selected foreign issues. On the short side, I think we could end up with a case of the bigger they are, the harder they fall. Therefore, keep an eye out for previous high fliers as they begin to fall from grace. No matter what you do (warning, sermon ahead), make sure you wait for entries and then honor your stops if triggered.

Best of luck with your trading today!

Dave