All That Glitters Is Gold
Just when you thought it
was safe to go back in the water, they hit the markets again. After a
rapid morning rally that took out Tuesday morning’s high, the markets succumbed
to selling pressure. The afternoon release of the Fed Beige Book brought
additional selling pressure to all indexes. Nothing was left unscathed — the
Semiconductors, Transports, Utilities, Cyclicals, Biotechs — you name it, they
sold them. The Gold index was the only gainer with a whopping .70 increase on
the day.
That being said, the markets have now sold off
for four or more days. Being short here is dangerous, as a countertrend relief
rally could begin at any time. At the time of this writing, the Initial
Unemployment Claims number has been released and after a brief selloff on the
news, the futures are coming back up to nearly unchanged. Overnight, the Nikkei
traded down more than 400. There’s not much impetus for the markets to move up
here, but establishing new shorts here, with most charts buried in oversold
levels, is not low risk. I’m not recommending the long side by any means, given
the very bearish action seen in trading over the past few sessions. If you’re
already short, hang on with tight stops and see what the trade brings you. The
only scenario that would make me establish new shorts would be a break of
Wednesday’s lows after a brief rally. Like yesterday, this would show me that
the bulls have no strength and serious selling pressure could hit the markets
again.
Below are a few charts with notes shown on each.
In this environment of low volume and whipsaw
action, experience tells me to play lightly and cautiously. Everyone — from
daytraders to floor traders to hedge fund managers — is nervous right now.
Nervous traders cause erratic markets. A break of yesterday’s lows could lead to
some serious capitulation selling that could take us straight back to July’s
lows. Inexperienced traders are getting destroyed in these markets. Never enter
a play unless you know exactly why you’re doing it, what your targets are and
what your exit strategy is if the trade goes against you. As always, good luck
trading!
Carolyn