Show Me-This Will Be Key

Random Thoughts

Hey Dave, you’re the IPO expert, what about Alibaba (BABA)? Alibaba is no different than any other IPO when it comes to trading. It must trade for at least a week and then I’ll make a decision. Speculating this early is dangerous and a guess at best. With that said, IPOs that come public with great hype often make their high on the first day of trading. They then tend to die out. Everyone rushes in at first and then begins to look for an exit. Again though, take things one day at a time. Let it trade for a week and then we’ll decide.
Someday, I plan on doing an in-depth course on IPOs where I will teach all of these things and more. Wait, I already did! 🙂 Click Here to check it out. Warning, it’s not free but worth it.

Let’s get back to the overall market.

On Friday stocks started strong but stalled out.

The Ps (S&P 500) probed all-time highs but right back in to close flat on the day. It’s not the end of the world but a little follow through would have been nice.

The Quack (Nasdaq) gapped higher but immediately found its high and begin to sell off. This is why you have to be careful buying the opening euphoria. For the day, it lost around 1/3%. It’s not the end of the world here either but it does put the index back into its trading range. As usual, follow through will be key.

The Rusty (IWM) remains a bummer. It too gapped higher and sold off but it ended much more than flat-ish on the day. It lost just over 1 ¼%. This action reflected the internals. Most stocks were soft.

Like the Ps & Quack, quite a few areas stalled at (or near) their prior highs. These include but not limited to Chemicals, Hardware, Semis, and Health Services. I can go on and on but you get the idea.

Gold continued to implode. This is in spite of plagues, Isis, wars, and leaked naked pictures of nearly 100 celebrities—hey, I’m forced to do a lot of research for this column. Seriously, it is interesting that Gold has taken on a “What, me worry?” attitude. I’d avoid it and resist the temptation to bottom fish. I do think we’ll see the mother of all bottoms here—someday. For now, just wait for the next emerging trend signal such as a Bowtie or a First Thrust (see education).

So what do we do? I think we could be entering a Missouri market—Show Me. As usual, follow through will be key. I’m not seeing a lot of meaningful setups at this juncture. I’m seeing a few shorts but I’d avoid getting aggressive here unless the market tips its hand. For now, as long as the market is hovering at or near new highs, you want to err on the long side. Since there aren’t a lot of setups at this juncture, again, wait for follow through and subsequent setups before looking to take new action. In the meantime, manage your existing portfolio. Take partial profits as offered and honor your stops just in case. As I preach, let the ebb and flow control your portfolio. Once you learn to do this, your life gets a lot easier. Your portfolio adjust itself. This is hard for many, especially the successful in life. Their success has come from being “hands on.” In trading though, it’s often “hands off.”

Best of luck with your trading today!

Dave