Bad Breadth
On Wednesday, the Nasdaq opened lower but reversed fairly
quickly. It then chopped back and forth before finally selling off going into
the close. Once again, this
action has it closing just about where it opened.
The S&P turned back down and is now once again
challenging its July lows.
Short-term breadth (advance/decline) average
indicators such as the CHADTP are at extremely low levels. This is confirmed by
very low longer-term average breadth indicators such as the McClellan
Oscillator.
The VIX began to stretch away from its 10-day moving
average (a) but it’s no where near the levels (relative to its 10-day moving
average) that occurs during a panicky situation (b).
So what do we do? The market is now even more
oversold based on price and the above indicators. This suggests that we
are getting closer to a bounce. However, as you know, oversold can often become
more oversold.. Therefore, tread lightly and think carefully before establishing
new positions (on either side). And, continue to trail/scale on existing
shorts.
No setups tonight. We could see setups soon in retail,
banks, semis, software and other sectors in serious downtrends.
Trail ‘Em
Lately, I have been discussing using a trailing stop on the
Software Holdrs
(
SWH |
Quote |
Chart |
News |
PowerRating), mentioned recently (see archives). I was discussing using
using either a 1.5 point stop or a 2-bar high. For Tuesday, I had dropped the
stop down to 1.5 points (from Monday’s close, 21.68). Going into Thursday, let’s
assume that the trailing stop remains unchanged (a).
Best of luck with
your trading on Thusday!
Dave Landry
P.S. Reminder: Protective stops on
every trade!
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rudimentary background to a Master’s-level trading education could be very successful. You have done a superb job! My hat is off to you Mr. Landry!!!….”
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