Bounce Mode?
On Friday, the Nasdaq gapped higher but began to sell off.
It then chopped both higher and lower throughout the day before closing flat.
The S&P chopped around before ending lower.
Once again, the VIX is still “stretched” (measured as 10% or more away from its 10-day moving average and it’s low is greater
than that average). Even more interesting is the fact that it appears to be
reversing from this conditions. This suggests that the market has the potential
to bounce (i.e., a CVR-III Modified buy).
So what do we do? Considering the above and recent buy
signals (e.g., a TRIN Reversal) it appears that the market has the potential to
bounce from these levels. Therefore, if you are nimble, you might look to
play this reversal in the index shares. Just don’t overstay your welcome since
you are fighting a big blue down arrow. On the short side, I would continue to scale out
and tighten stops. I think we’ll have a chance to “re-set” positions
over the next few days.
No setups today (Monday). Manage what you have or look to
play a reversal in the index shares (provided you are nimble).
Best of luck with
your trading on Monday!
Dave Landry
P.S. Reminder: Protective stops on
every trade!
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