Trading, Smoking And Drinking
On Monday, the Nasdaq opened flat and after a brief
blip up, turned down and sold off. Then after some late-morning/early afternoon
drifting, it resumed its sell off. This action has it closing poorly, at 5-year
(closing) lows and within spitting distance of its recent lows.
The S&P, like the Nasdaq, continued to sell off hard
out of a pullback from lows.
The low of the VIX is now above its 10-day moving and more
than 10% away from its average. In other words, it’s a CVR III buy signal. This
signal, which tends to lead the market, suggests we could get a bounce within
the next few days.
So what do we do? The market is becoming oversold as it
continues to sell off out of a pullback from lows. However, it’s now getting too
late in the swing cycle to establish new short positions. Therefore, continue to
tighten stops on existing
shorts and continue to take partial profits. On the long side, (is it just me,
or does that sound funny?), continue to watch the biotechs (see below).
Looking to potential setups, although biotech sold off
fairly hard on Monday, they still appears to be “shaping up.” Therefore, you might
look to play the Ishares here (either the BBH or IBB). However, continue to wait
for entries just in case, in light of the poor action in the market.
Smoke ’em If You Got ’em
Chubb Corp.
(
CB |
Quote |
Chart |
News |
PowerRating), mentioned recently and in the weak
insurance sector (I told you weak insurance wasn’t any good!), continues to sell
off hard (a) out of a steep pullback. If you took this trade, don’t forget to
lock in a piece and tighten your stop to (at least) breakeven.
Toasted Head
I was surprised at the number of people who knew the fire
breathing bear was from “Toasted Head” wine. Congratulations to Robert
T. for being the first to answer correctly. I’ll pick a few more winners from
the correct answers.
Best of luck with
your trading on Tuesday!
Dave Landry
P.S. Reminder: Protective stops on
every trade!