Canary(ies) In A Coal Mine?

Random Thoughts

The Ps started firm but quickly found their high and then sold off fairly hard. They did manage to close off their worst levels but still lost ½%. This action gives up Tuesday’s gains and it forms an outside day down.

The Quack put in a somewhat similar performance. It too formed an outside day down. I don’t get too excited about a 1-day reversal pattern (like certain people who scream that it’s the end of the world when the market makes a fat wrestler with a mawashi wedgie or a baby with a poopy diaper pattern). However, it does have to be scored as a negative day-duh.

Internally, it was a little uglier than the Ps and Quack would suggest. I suppose that’s not a huge surprise when you see that the Rusty was down over 1 1/3%.

I remain concerned about the growing number of debacle de jours. PRXL and FLEX were the latest victims. In preparation for today’s chart show, I made a list of recent stocks that have been hit hard. I’m mostly concerned about household names, higher volume stocks (vs. thin), and those stocks that were recently at higher levels. Here are some of the names that I found: AGCO,AKAM,ARIA,CETV,CNDO,CTXS,CVA,CYOU,DAN,FENG,FTI,HWAY,INVN,MWV,NQ,QLIK, RFMD,RYN,SANM,SOHU,SWK,SYMC,UBS,WU

This action suggests that these stocks were priced for perfection. One has to wonder if these are “Canaries in the coal mine?”

For the most part, most areas still remain in uptrends and so far, they have only begun to pull back.

Foreign shares continue to hang in there.

As you know, I’m a one day at a time kind of day guy. Yesterday was pretty ugly-to coin an oxymoron. One or two big updates would make all the difference in the world.

So what do we do? I think it’s too early to run out into the streets and scream that the sky is falling. You can’t completely ignore the aforementioned Canaries though. Focus mostly on the long side but use very liberal entries. This will help to avoid new positions should things worsen. I wouldn’t rush out and sell the farm but you might consider putting on a short or two just in case. Worse case, you get stuck with a bad trade and your longs take off to more than make up for it. As usual, regardless of what you do, make sure you honor your stops.

Futures are soft pre-market.

Best of luck with your trading today!

Dave

P.S. Come to the chart show if you are not busy saving lives, building buildings, selling Canaries, repairing automatic transmissions, or doing other great things.
See announcements to sign up.