Sell The Farm Or Stick With The Plan?

Random Thoughts

The Ps started weak but quickly reversed to form a nearly textbook opening gap reversal (OGRe). Unfortunately, they died out by the end of the day to finish just about where they started. For the day, they lost nearly 1%. This action puts them back below the well watched 50-day moving average.

Speaking of “da fidy,” it is interesting that the slope has changed from flat to down. I suppose this isn’t a shocker when you look back over 4 months and see that the Ps are relatively unchanged.

I still remain concerned about the triple peaks that the Ps have made since May. Ideally, I’d like to see them blast higher and not look back for a while.

The Quack still looks better on a relative strength basis. It remains in a longer-term uptrend. Unfortunately, it has lost momentum over the last few weeks. It ended down nearly 1% on Monday. This action keeps it in a short-term sideways range.

Okay, there’s your history lesson. Now what?

With things mixed, I’m seeing fewer and fewer setups. Given the failure of the market to follow through, this is probably a good thing.

Once again, it still remains a tale of two markets. As a general statement, the big cap stocks as represented by the S&P have lost momentum but technology and smaller cap stocks as represented by the Nasdaq remain in uptrends.

So what do we do? The plan remains the same with a couple of caveats. Instead of remaining selective on new setups, be very selective. Wait for entries but make sure they are liberal—give them some “wiggle room” to help avoid getting triggered on noise along. And, of course, once triggered, make sure that you honor your stops just in case. And, once again, just because the market has lost a little steam doesn’t mean that you should sell the farm and then go 100% to short. No need to be a hero. Do keep an eye out for potential shorts, with the above caveats. Just don’t go “crazy bearish” (see recent columns).

Futures are flat to firm pre-market.

Best of luck with your trading today!

Dave