Sell The Farm?

Random Thoughts

The Ps tried to rally but came right back in. For the day, they lost a little over ¼%. This isn’t a really big deal but it does mask some bigger issues.

The Quack was a little more concerning. It gapped higher in an “off to the races” sort of manner but it quickly found its high and began to sell off. For the day, it lost nearly 1%. This was a little more indicative of what happened internally.

Drugs, overall, were hit hard, losing over 2 ½%.

Biotech was hit even harder, losing over 4 1/2%. The bigger they are, the harder they fell here.

When you see prior leaders begin to break down, it is cause for concern.

Other areas must quickly emerge as new leaders and not join in the fray.

Banks approached their old highs but were turned back.

Ditto for Retail.

Other areas such as Manufacturing didn’t make it back that far.

These, and quite a few others, have made sharp “V” recoveries and they continue to look like potential double tops.

Some areas like Internet have dropped back below their prior breakout levels.

Okay Big Dave, thanks for a history lesson on Friday’s action. Now what? Well, it’s looking a little ominous at the moment. It’s time like these you want to take things one day at a time. And, by the way, you always want to take things one day at a time when it comes to the markets (and life!). As long as the indices can hover near new highs, I’m not going to rush out and sell the farm. However, the fact that internals are weakening suggests that it might be a good time to have it appraised. Seriously, simple money and position management will continue to keep you on the right side of the market—or, out. I realized on Friday when talking with a client that we haven’t had a trigger in nearly a month. And, over the last month the market has not made much progress. So, there’s your testament for waiting for entries. Now, let’s talk about stops. If things do worsen, then stops will take your out of positions that fall with the tide they will keep you those positions that can swim against it. Take things day by day, setup by setup. If you really really like a setup, then take it. At the risk of preaching, just wait for an entry and use stops once triggered.

Futures are firm pre-market.

Best of luck with your trading today!

Dave