An Old Speech
On Wednesday, the Nasdaq opened higher but
immediately began to sell off. And, in general, it continued to sell off
throughout the day. This action has it closing poorly and at five-year lows.
The S&P also sold off hard. This action has it closing
near multi-year lows.
The “good in the bad” is the fact that the VIX is
now more than 10% away from its 10-day moving average and its low is greater
than that average. In other words, it’s a CVR-III buy (a system I co-created
with Connors). The system is about 70% accurate in predicting a change in
market direction over the next three to seven days. The advantage of the system is that
it tends to lead the market. The disadvantage is that it tends to lead the
market. Therefore, I use it as a “get ready.” A sign to trail stops on
shorts/take partial profits and prepare for a bounce.
So what do we do? This is the time where I give my patented
“Damned if you do and damned if you don’t” speech. If you try to short
this late in the swing cycle, the market will bounce. If you try to buy,
oversold will become more oversold. Therefore, (assuming you have been following
the big blue arrows) look to scale out of shorts and trail stops.
Looking to potential setups (in case you ignored what I
just said), Electronic Data Systems (EDS),
in the weak software: information service sector, still looks poised to resume
its meltdown out of a Trend Pivot Pullback.
Best of luck with your trading on Thursday!
Dave Landry
P.S. Reminder: Protective stops on every trade!
P.P.S. I’ll be in
TradersWire tomorrow at 4:30 PM ET for TraderTalk. See you there.
“……A
long overdue note to let you know I am re-reading your book for the third time;
I have a library full, but I keep returning to yours, because ultimately its the
clarity and relative simplicity that appeals to me; And it has contributed to
being more successful in my trading. I am becoming more convinced every week
that its more important to implement a simple, but sound strategy in an
accurate, disciplined way than to stuff my head with hundreds of different
strategies. These strategies might all have merit, but it causes information
overload and just muddies the water for me; anyway, thanks a lot, keep up the
good column;
Richard L.
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