Keep An Eye On The Bowtie

Random Thoughts

As I said yesterday, Tuesday just looked like a bounce after nearly a week of trading lower.

On Wednesday the market turned right back down.

The Ps took out Monday’s low. This action has them at one-month plus lows.

The Bowtie sell signal is getting closer and closer. What’s concerning is that this signal is coming off of major highs. Not every Bowtie off of all-time highs will turn into a top but every top will have a Bowtie or other transitional pattern. You might want to write that down. Come to the chart show later today and I’ll walk you through it.

Wednesday’s action keeps the Ps well below their 50-day moving average. Again, there’s nothing magical about the 50-day moving average but it is well watched and worth watching. It can help to keep you on the right side of the market-I’ll cover this later today in the show too.

The Quack and Rusty didn’t make new lows but were down nonetheless.

The Quack formed a slightly bearish outside day down.

The Rusty, like the Ps could form a Bowtie down very soon. You might want to watch for a shorting opportunity here. You’re welcome!

Bonds resumed their slide to close at multi-year lows.

Once again, I’m not seeing a lot of shorts setting up just yet, but on a bit of a bounce there will likely be of plethora of setups in the recently mentioned previous high fliers such as Biotech, Retail, and Health Services. There’s plenty more that look questionable too–again, come to the chart show!

So what do we do? Keep an eye on the index ETFs for possible shorting opportunities. This will help you to gain exposure to the short side while looking for setups. As usual, make sure you wait for an entries, especially since the Ps are strong pre-market. With the notable exception of the recently mentioned Metals & Mining stocks, I’d avoid the long side for now. If the market is going to resume its longer-term uptrend then it will have to prove it to me by making new highs. I’m totally okay with giving up the first few percent of the move. You’ll always be a little late as a trend follower. You have to wait for the trend, and then, follow it. Makes sense, huh?

Best of luck with your trading today!

Dave