Last time we had the NASDAQ breakout and the S&P and Dow fail to follow I felt the same as I do now, except today we had the mirror opposite. 3C is showing significant divergences to the downside, my money is on false breakouts today in the Dow and S&P, but if they are not, we can look forward to another rally and a right shoulder to complete a H&S top. News is not driving this market, it is being used to drive volatility. Fundamentals are out the window. How can you have a valid argument for fundamentals/economics when an index is down nearly 300 points in a day or two and then up 200+ the next? This is one of the toughest trading environments I've seen since late 2008 when the Fed was the culprit in manipulating the market.
I'm hesitant to issue any trades until this situation resolves which could be as soon as tomorrow if the Dow/S&P fail and the NASDAQ and Russell fail to make any upside. At that point things will make a lot more sense and our plan will remain valid and intact. If not, then be prepared to hedge and raise cash. You are now trading in one of the most difficult environments I've seen in a few years. As I shout from the rooftops every night , "RISK MANAGEMENT!"
THE UNG TRADE IS WORKING SPECTACULARLY, STICK WITH IT!
WDC is approaching an area in which it would make for a high probability low risk short.
Watch LZB (S) for a break below $10
Watch the SPY for a break below $111, it could make for a quick profitable short.
Any move up in the Dollar index or UUP will be very bearish for the market. It traded in a fairly narrow range today suggesting that the downside pressure may have subsided, there are short term positive divergences as well.
URRE is a highly speculative play, but it looks like the momentum crowd may be sniffing around. You could try a long on the open and close it at the end of the day should it take any loss or make a new low. This would be a quick pop trade only. It is highly speculative.
The exact same applies for URZ.
If we do continue on an upward trajectory, I have a lot of long positions that should do well(in an upside environment), BUT, Wall Street is using extreme volatility, as noted 2/3 of the market days in the last month have seen triple digit moves up or down. I do not think it is wise to chase yesterday's big move considering the fact that the S&P 500 has had a net move of -.50% in the last 20 trading days (4 weeks). This is the meat grinder. For now, lets stick with the plan until we see something suggesting otherwise. Chasing yesterday's triple digit move is more than likely going to put you on the wrong side of the next day's triple digit move. As I've stated before, your greatest edge over Wall Street is your ability to wait. Patience isn't easy, but it is exactly what is called for right now.
If you have an interest in a specific stock, email me. If you are even a little unsure about risk management, email me immediately.
Tomorrow is another day.
5 years ago
