Tom Petty Got It Right

Random Thoughts

It took me years of trying to making something happen in less-than-ideal conditions to realize that sometimes, the best action is no new action. When you find yourself in a hole, stop digging. This goes against human nature. If you’re not getting results, do more, work harder. If you get punched, you want to punch back even harder. Unfortunately, logic doesn’t often apply when it comes to the markets.

As I wrote in Layman’s, Tom Petty got it right: “The waiting is the hardest part.”

Just like you can’t catch a tan when the sun isn’t shining, you can’t catch a trend when there is none. The Ps (S&P 500) & Quack (Nasdaq) remain stuck in a sideways range and the Rusty (IWM) is actually negative for the year.

Let’s look at the scoreboard.

The Ps sold off but recovered to lose less than ¼% for the day. What’s unfortunate is that they did not follow through from Friday’s all-is-good-in-the-world-lets-start-buying-stocks-like-crazy rally. The only silver lining here is that all it would take is just one decent day to put it back to all-time highs.

Ditto for the Quack (for decade plus highs here).

Yet again, I remain concerned about the Rusty. It is on the cusp of forming a Bowtie down after just hitting all-time highs. And, what’s worse is that those all-time highs corresponded with the previous peak set back in March. In other words, there’s a big picture double top. As I said previously, this is one signal that I actually hope doesn’t work.

With the indices ended slightly lower, not much changes in the sectors.

Drugs still have a double top in place. Biotech here has still stalled short of recent and not so recent highs (it didn’t make it back to its “double top” highs).

The Semis remain in a longer-term uptrend but continue to trade mostly sideways as of late.

Leisure is forming a Bowtie down from all-time highs. It appears to be on the cusp of rolling over.

Gold and Silver were mixed. So far, I still think a bottom remains in place here. Unfortunately, (again) it is not going to be a rout higher—expect delays.

The rest of the Metals & Mining overall ended higher with Aluminum once again leading the way. It closed at multi-year highs and remains in a solid uptrend.

Energies ended a smidge higher. They remain stuck in a sideways range for the last month or so.

So what do we do? As I preach, follow through is key. And, on Monday, we didn’t see any. The Ps and Quack remain range bound. Recognizing that is key. Since the intermediate-term arrow is pointing sideways, there is no present trend to catch. So, you better make darn sure your setup has the potential to defy gravity. If not, you’ll get chewed up. Hopefully, and I hate to use the word hope in this business, we’ll see some improvement soon. If not, based on the action in the Rusty and many sectors we could see some shorts setting up shortly. In the meantime, Gold & Silver still look like they have bottomed. The Juniors here (GDXJ) might be a good way to play this. Again though, just remember that commodity related stocks can make for a bumpy ride. Yet again, sometimes the best new action is no new action. Let everyone else fight it out. I write as if I were writing to not-so-big Dave of 20 years ago. What did he not know that he wish he knew then? The answer to that question is that sometimes you have to wait for the market to come to you. Wait for follow through.

Best of luck with your trading today!

Dave