Looking For Action? Stop!

Random Thoughts

The Ps (S&P 500) continued higher after Wednesday’s “pause” day, tacking on just over ½%. This action puts them back at all-time highs-so far, so good. As I preach, follow through is key. Ideally, I’d like to see them continue decisively higher before looking back. As usual, take things one day at a time.

The Quack (Nasdaq) also had a decent day, gaining the same exact amount as the Ps. This action has it closing at multi-month highs and less than 2 ½% away from multi-year highs. Ideally, I’d like to see those multi-year highs before getting too excited.

The Rusty (IWM) continues to lag behind. It gained around 1/3% for the day. So far, it remains in a downtrend and has only pulled back.

The sector action improved. It was good to see both recent leaders such as Energies and Foods rally along with the some of the recently beaten up growth areas such as technology.

Since the methodology requires a pullback and the indices are hitting new highs, there aren’t many meaningful long side setups. There are a few shorts setting up but I think this is more of a normal action (rallies creating pullbacks from lows) than an omen.

So what do we do? For now, the database is saying wait for new setups. If we’re in the early phases of a new leg higher there will be plenty enough time to get on board. If things don’t pan out, then there will be opportunities on the short side. I know waiting is boring. I know that some of you have left to go off to find action. This is a bad thing. You have to stick with a methodology—any methodology—and learn the nuances. If there’s nothing to do—regardless of the methodology, then don’t go off and look for action.

Futures are flat pre-market.

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

Dave