Monday Was Great But Don’t Get Too Excited

Random Thoughts

Stop me if you’ve heard this before but like life, in markets you have to take things one day at a time. Each day brings a new clue. What is, is. It doesn’t matter what the Yuan is doing,  the change in the price of tea in China,  or of course, THE SITUATION IN NIGERIA! (classic Big Dave inside joke/anecdote). If the market is going up, it is going up.

With that said, Monday was a great day—much better than it appeared on the surface. Let’s dig a little deeper.

The Ps (S&P 500) gained around ¼%. Not much to write home about here but it does put them just over 1 ½% away from all-time highs. So far though, they remain stuck in a range.

The Quack (Nasdaq) also gained around ¼%. Although it too remains stuck in a range, it is now less than ¾% away from 14-year highs.

The Rusty (IWM) tells the real story. It gained nearly 1%. This action has it within 1 ½% away from all-time highs. Unfortunately, it also remains stuck in a sideways trading range.

Internally the market was strong as evidenced by the strong Rusty.

Drugs and Biotech banged out new highs decisively.

The Semis, although still range bound, are approaching the top of their range.

Although it is too soon to call a bottom, Energies (the stocks) appear to be bottoming.

A bottom still appears to remain in place in Gold and Silver. In fact, I am seeing a plethora of setups here. Look for Bowties, First Thrust, and other emerging trend patterns here. SAND—full disclosure, a stock we are long-makes a good example here. It is a Bowtie, First Thrust, and a low level Cup and Handle.

Some of the big cap areas that have lost steam lately such as Durables peeped up to new highs.

Banks still look dubious but at least they managed to end higher. They still might die but based on Monday’s action they will have to die another day.

Real Estate banged out new highs with vigor. It continues to party like its 1999.

You can’t get too excited about one day’s action though. Again, take things one day at a time. And, unfortunately, we’re faced with a little adversity early on. Futures are getting hit hard pre-market.

Again, take things one day at time. If this is just a kneejerk and we finish the day higher, it would be a major positive. For the aggressive, watch for an opening gap reversal (OGRe). It’s not a bread and butter trade but more of something you do for S&Gs. You pick up a few dollars at a minimal amount of risk. See the articles under education for more on how to handle gaps.

So what do we do? Well, I was jazzed coming into today but it looks like the market dealt me a new hand. That’s why it is important to not get too excited one day’s action—especially when the market remains stuck in a range. For the most part, we wait. Continue to pick your spots carefully. Gold and Silver stocks might be a good play here since they can trade contra to the overall market. As usual, wait for entries and honor your stops once triggered—regardless of what you do.

Best of luck with your trading today!

Dave