The Importance Of Studying Market Internals
On Wednesday, the Nasdaq opened lower but began to rally
after some chopping around. However, it found its high late in the afternoon and
sold off fairly hard. This action has it closing poorly, in the minus column and
keeps it below its
50-day and 200-day moving averages.
Once again, the S&P was hit harder. This action has it closing
poorly. It remains well below its 50-day and 200-day moving average.
There seems to be a “rolling correction” within
the market. Broker/dealer appears to be the latest victim.
So what do we do? Nothing much has changed. Once again, as
I tool through hundreds of charts, the selling still appears to be broad based.
Further, as implied above, many individual sectors/stocks are getting hit
especially hard. Therefore, based on these poor internals, it still appears that
the path of least resistance remains down. However, the overall market is now even
more oversold based on indicators and price itself. Therefore, the best course
of action is to continue to wait for a bounce before looking for shorting
opportunities. After that, I believe that trend trend-transition patterns (e.g. First Thrusts, Bow
Ties, Inverted Cup and Handles) will likely offer better opportunities than
trend resumption patterns such as pullbacks. Said alternatively, the bigger they
are, the harder fall.
There remain very few meaningful setups. Therefore, no setups tonight,
continue to wait for a market bounce before looking
to get short.
Best of luck with your trading on Thursday!
Dave Landry
P.S. Reminder: Protective stops on
every trade!
“….recently read your book and thought it was one of the best I have ever read, and I read
a lot of them….”
Sean G.
