When In Doubt-Take The Chart Out

Random Thoughts

The market has begun to stall out in its retrace rally.

As I often say, when it doubt, take the chart out.

This action the indices set up as pullbacks. Again, if you don’t already have some shorts working, you might look to short the index ETFs until you do.

Longer-term it’s hard to catch a trend in index shares (see my webcasts on efficiency) but shorter-term they can help to give you needed exposure.

Once again, most sectors still remain in solid downtrends. There are few exceptions but nothing to get excited about.

So what do we do? For the most part, more cutting and pasting: Continue to keep an eye out for new shorts. As mentioned above, use ETFs while looking for new opportunities in individual issues. Continue to avoid the long side for now–unless you really like a setup and think it can trade contra to the overall market (e.g. we are long a uranium stock). Manage existing shorts. Honor your stops just in case the market continues to bounce. Take partial profits/trail your stops lower as offered. Honor your stops on existing longs. As I preach, letting the ebb and flow of money management and portfolio management (entries, stops, trailing stops, taking partial profits) can help to keep you on the right side of the market/in the right issues—especially in questionable conditions. If the market goes up, we’ll get stopped out of our shorts, our longs will start performing, and there will be new longs setting up. If the market goes down, we’ll get stopped out of our longs, the shorts will begin to pay off, and new shorting opportunities will present themselves.

Futures are firm pre-market.

Best of luck with your trading today!

Dave