Is This The Start Of Something Bigger?
On Monday, the Nasdaq gapped lower, traded back-and-forth
throughout most of the day, and then finally, sold off going into the close.
This action has it closing poorly and puts it near its
50-day moving average.Â
The S&P put in a somewhat similar performance.
This action also has it too closing poorly and nearing its
50-day moving average.
So what do we do? With all three indices are
at or near 1-month lows, I guess the $64,000 question is: “Is this a
pullback or the start of something bigger?” When faced with such decisions,
I dig a little deeper to see if I can gleam something from individual stocks and
sectors. Unfortunately, aside from those that are commodity related, most are
beginning to look questionable too. This leaves us at a dangerous juncture. I
think you’re better off sitting on the sidelines and letting things shake out
than attempting to pick sides. If the market stabilizes and subsequently begins
to rally, then the long side can once again be played. If it continues to roll
over, then shorts might be the best bet on the first minor bounce.Â
No setups tonight (Monday). On continued weakness, I will
evaluate potential transitional patterns on the short side.
Best of luck with your trading on Tuesday!Â
Dave Landry
P.S. Reminder: Protective stops on every trade!
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