First Pullbacks
Each evening we focus
on the most interesting aspects for the upcoming trading
day. The comments are based on observations of the nightly
updates of the Stocks/Sectors and Market Bias pages. They
are provided for educational purposes only and are not
intended to be direct trading advice. Also, keep in mind
that these remarks are made up to 12 hours in advance of the
markets opening. Therefore, overnight events may alter the
outcome of these observations.
On Thursday, the Nasdaq open higher and quickly found its
low. It then worked its way higher and closed on it high. This has the index
well above the 50-day moving average.
It appears the market has undergone a major shift in
sentiment. Companies are getting rewarded for beating reduced expectations. And,
to some extent, are even going up on bad news. Our job is not to fight this
perverse logic. We must believe in what we see and not and what we think.
So what do we do? We are extremely overbought based on the Vix, the average
NYSE TRIN readings, the Advance/Decline readings, the McCllean Oscillator and
just plan ‘ole price. Therefore, my commentary is essentially a repeat of
last night’s. If you try to go long in here, we’ll get the
correction from overbought. If you try to short, overbought will become more
overbought.
For now, I think the best thing to do is to watch the
momentum lists. From this, create a small database of names and wait for setups. As an example,
notice the moving averages on American Online
(
AOL |
Quote |
Chart |
News |
PowerRating) (Internet
Fab 5 List) have “bow tied” as the stock transitions from downtrend to uptrend.
Look for transition patterns such as this when building your watch list. Then, wait for the
first correction before attempting entries.
Other
Hope to see you tomorrow night
at the cocktail party for Tony
Saliba’s Options Seminar!
Best
of luck with your trading on Friday!
P.S. Reminder:
Protective stops on every trade!
P.P.S. Once again, my neighbor Bubba Boudreaux
will be house sitting for me while I’m away. Feel free to stop by for a demonstration
of his massive gun collection–the Mac-10 is my favorite!
“..Your
concise and clear words have helped me climb up the learning curve of trading faster
than any other resource….”
Bill C.
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