Emeril Market
On Monday, the Nasdaq opened weaker and continued weaker
throughout the day. This action has it closing poorly and suggests that it will
return the bottom of its recent trading range.
The S&P also sold off hard. This action puts it close to
the bottom of its trading range.
Whenever I speak at a conference, inevitably I’m asked to
pick a market direction. Over the weekend, I stated that things look
constructive and that so far, the indices only appear to be pulling back.
However (I had to cover my butt), I stated that as a short-term trader, I try to
only look a few days out. And, that one or two trading days could make a big
difference. This was especially true if we return to the bottom of the recent
trading range. And on Monday, we did.
What concerns me is that the sector rotation has been
vicious. As someone said in chat today:
“Just when you think that
maybe things will improve for us trend following morons, BAM! (as Emeril would
say), back to chop mode.”
I fully agree. A good recent example of this is the HMOs.
Just when they were beginning to look constructive, reaching new highs (a), they
promptly turned around and sold off hard (b).
Based on the above (and numerous examples throughout this
bear market), one has to wonder if sectors that so far, just appear to be
pulling back, will end in a similar fate.
Another concern I have is that many sectors, like the
market itself, are stalling out at or near their August highs.
So what do we do? Based on the above, I think the best
action is to play it close to the vest. If this market continues to slide and
takes out the bottom of its trading range, we could see a plethora of shorts
setting up in the not-too-distant future.
No setups tonight.
Other
Special thanks to the Cornerstone Investor/Trader Group for
having me as one of their speakers over the weekend.
Best of luck with
your trading on Tuesday!
Dave Landry
P.S. Reminder: Protective stops on
every trade!
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