Still The Last Person
On Thursday, the Nasdaq gapped higher and continued higher
for a solid trend day. This action puts it right at the area of its recent
breakdown/overhead resistance.
The S&P (and the Dow) also ended sharply higher. This
action is setting up these indices (so far) as sharp pullbacks from lows.
The VIX imploded: It gapped lower and continued lower
throughout the day. This action put the index more than 10% away from its moving
average (i.e., a CVR III sell signal).
So what do we do? I’m amazed at the number of times I heard
“bottom” today (Monday). Me, I don’t know. Maybe it is and maybe it
isn’t. You know me, I’m in the
wait-and-see camp. And, as mentioned recently, I will be the last person to call a bottom
(and if you are a momentum player, then so should you be). If the market
continues higher, we should see transitional setups (e.g., Bow Ties, First
Thrusts) soon. For now though, I can’t ignore the action in the VIX and the
(quickly) overbought nature of the indices. Therefore, I still think the short
side is still the logical play. However, don’t jump in front of the freight
train just yet–wait for signs of a reversal.
Not setups tonight. If you are an aggressive daytrader, you
might look to play an intraday reversal in the index shares should they gap
higher and show signs of stalling.
Best of luck with
your trading on Tuesday!
Dave Landry
P.S. Reminder: Protective stops on
every trade!