Yet Another Key Speech

Random Thoughts

As a trend follower, we need a trend to follow. So, here’s my follow through is key speech. Follow through means just that, the market makes a move and then follows through. I know, I’m not splitting the atom here but you’d be surprised how many try to trade where there is no trend.

I’m not a big fan of trading breakouts either since they often fail. I suppose they worked a lot better before everybody and their brother had a computer on their desk. Nowadays, it becomes an “everybody knows that” event (see yesterday’s column).

Looking to the Ps (S&P 500) there have been several false breakouts in as many months. Don’t get me wrong, Tuesday’s breakout to all-time highs is a good thing. In markets though, you’re often left with “now what?”

So, what now? Well, we didn’t see any follow through in the Ps. Sometimes markets will thrust, pause, then thrust again so you don’t want to read too much into Wednesday’s action. It does tell you, at least so far, that this isn’t going to be a market that’s going to straight up and not look back.

The Quack (Nasdaq) also stalled out a bit.

The Rusty (IWM) still looks the worst and had the worst performance yesterday. It lost just over ½%. This action has it stalling right at its 50-day moving average. One has to wonder if it just came back to “Kiss The Moving Average Goodbye”—come to the chart show and I’ll flesh this out. Obviously, so far, there is no follow through here.

As usual, you want to take things one day at a time. That’s one of the few things that’s the same in both life and markets.

So what do we do? Follow though is key. Stop me if you’ve heard that before. Therefore, wait. The good news is that the recent choppy nature of the market has left us with very few setups. Further, the lack of follow through has us sitting on some losses (something I’ll also flesh out later today). When both the portfolio and database tell you that conditions might not be ideal, it is often a good idea to listen. When, not if, the market trends again there will be plenty of opportunities along the way. It’s the patience in the meantime that separates the men from the boys.

Futures are flat pre-market.

Best of luck with your trading (or waiting!!!) today!

Dave