Not Sure What To Do? Listen To This

Random Thoughts

The Ps (S&P 500) bounced, gaining over 1%.

The Quack (Nasdaq) also bounced, gaining 1 ¼%. Ditto for the Rusty (IWM).

The index futures are very strong pre-market.

It’s good to see the market bounce. This action, so far, suggests that it is not going to be a straight rout down. Further, if the early morning strength can follow through, it will make the eager bears questions their new positions. They’re quick to cover, and this buying can turn the market on a dime.

Thinking too much can get you into trouble. Just follow the bouncing ball. In general though, if a market can recover quickly from a slide, it forces eager bears out and it keeps the Johnny-come-latelies from dumping. Again, don’t think too much but do remember that there are people behind the bars. And, these people, like you, me, and the guy who screams on TV have emotions. It’s our job to read those emotions.

The market does have its work cut out for it, especially in the sectors. As mentioned recently, many have dropped below their prior peaks. It’ll be important for these areas to claw their way back to new highs.

Gold and Silver came back in a little on Wednesday. So far, they appear to be bottoming. As I have said ad nauseam, just wait for bona fide buy signals since this appears to be more of a process than an event.

So what do we do? As I preach, what is, is. Pay attention to price. If the market can get back to new highs, then the trend is up. If it turns back down and starts making new lows, then the new trend is down. And, if it bounces around then the trend is sideways. It’s that simple. It’s never easy but it is amazing how simple it can be, especially in hindsight. The good thing is that the database isn’t producing a whole lot of meaningful setups. I used to hate this because I craved the action. Now I just listen. It is telling me to let everyone else fight it out. If the market does rollover, then we’ll see a plethora of shorts soon. If we go back to new highs, then we’ll start seeing new longs soon. In the meantime, there’s no need to take drastic action. Protective stops will tell you exactly what to do on existing positions.

Best of luck with your trading today!

Dave

P.S. Today is the first Week In Charts webinar for the year. I have a great show on tap. So far, I have IPOs, the psychology of the players near new highs, riding out big winners, and a bunch of other stuff. Be there because you need to know these things. Bring your questions. Also, bring you favorite stock picks and we’ll have a look (make sure that they are trending though!). Dress is casual. Be there or be square—unless of course you’re busy saving lives, building buildings, training dogs, repairing automatic transmissions, or other great things. If not, call in sick!