If You’re Aggressive, Here’s A Play For Monday
Looking to the indices, on Friday, the Nasdaq opened
slightly firmer but found its high fairly quickly in early morning trading and
began to sell off. It bounced around mid-day but the selling resumed (and
accelerated) late in the day. This action has it closing poorly.
The S&P also closed poorly but wasn’t hit quite
as hard as the Nasdaq. This action has it closing below its 50-day moving
average.
Looking to the sectors, I continue to see broad weakness.
Only 16 of the 239 sectors/sub-sector that I follow finished up–and none by
much. As one would expect with the Nasdaq down so much lately, virtually all
tech sectors have been hit especially hard. And, unless we see some
mother-of-all turnaround here, most appear to have topped. The list includes the
usual suspects: semis, software, telecom, and biotech but other areas such as
computer hardware (amongst others) are now beginning to get hit hard. Outside of tech, most cyclicals appear to be breaking
down. Defense bounced slightly but remains in meltdown mode. Retail continues to
slide. Even those sectors such as broker/dealer and Internet that have been hanging in there (longer-term)
were hit pretty hard on Friday. One now has to wonder if they too will join in
the fray. And finally, our old friend gold is getting whacked too.
The reversal players have been licking their chops lately.
A few have even called me to brag. Does this make me want to scrap my (momentum
based) methodology and become a reversal player? No. As we say down south,
“the sun doesn’t shine on the same dog’s ass everyday.”
Although, I can tell you in all honesty, it certainly hasn’t shined on mine
lately. However, I know that by backing off when the market is making a sharp
transition, I can protect equity for better times. Further, if this is the
“real deal” there will be plenty opportunities shortly in Transitional
setups (e.g. Bow Ties, First Thrust, etc…email me if you need the rules)
soon.
So what do we do? The market is way
oversold (see last night’s commentary for the indicators I use). Further,
tonight (Friday) we have multiple VIX buy signals triggering (and other systems
to follow soon). Therefore, for the aggressive (possibly a day trade), there
could be a bounce play in the index shares, especially if the gap sharply lower
on the open (and show signs of reversing). On the short side, the market is too
oversold to consider new positions. Wait for a bounce.
No setups tonight. Remain patient. We will likely see a
plethora of transitional shorts setting up soon.
Best of luck with your trading on Monday!
Dave Landry
P.S. Reminder: Protective stops on
every trade!
“….I just finished reading your book for the 3rd
time…the book has paid for itself trade after trade…thanks for a straightforward
swing trading manual! …”
Steve T.
