How To Preserve Capital
In This Market
Looking to the indices, on Friday, the Nasdaq opened firmer
but soon found its high and began to slide. It found its low by mid-day and
generally worked its higher in afternoon trading but sold off again going into the close.
This action has it stalling out at its 50-day moving
average (which also corresponds with an overhead resistance level).
The S&P also traded back-and-forth but managed to close
(slightly) in the plus column.
It remains in a sideways trading range.
So what do we do? I guess the $64,000
questions are: Is this just a correction in a bull move (after all, the Nasdaq,
peak to trough has gone up over 90% in the last year and a half) -or- Is this
the start of something bigger? The talking heads seem to be in the correction
camp. “Buy this dip” was the last thing I heard today as I furiously
tried to find my remote to hit mute. I’m not sure what makes them so sure and
how anyone can make such big picture predictions. For me, it’s one day at a
time. And right now, from a momentum trader’s perspective, I really don’t have a
strong conviction about this market, one way or the other. The S&P hasn’t
gone anywhere in 6-weeks. And those few areas that have been strong are
now beginning to loose momentum too. Technology looks horrible. One would think
that there would be a plethora of stocks setting up here (as shorts). However,
due to recent wide-and-loose trading, it’s very difficult to find a
“clean” setup.
Speaking of setups, when you consider the above, I think
the sidelines remains the best place to be. Let the market chew everyone else up
while you preserve your capital. True, you may miss an opportunity here and
there but so what. It’s a marathon not a sprint. If you must trade, maybe look
for a shorting opportunity in technology, either in the Nasdaq itself (via the
Q’s)
(
QQQ |
Quote |
Chart |
News |
PowerRating) or in the Technology Shares
(
XLK |
Quote |
Chart |
News |
PowerRating).
Best of luck with your trading (or not trading!) on Monday!
Dave Landry
P.S. Reminder: Protective stops on every trade!
P.P.S. My new 20-hour course is being released on Friday, February 28.
Click here for details.