Why I Think The Market Is Entering A Corrective Phase
Looking to the indices, on Wednesday, the Nasdaq opened
firmer but immediately reversed and began to sell off. Then, after retracing
throughout mid-day, the selling resumed in afternoon trading. It did manage to
bounce late in the day but this wasn’t enough to keep it from closing poorly.
This action has it reversing at its old highs and could suggests that it
is entering a corrective phase.
The S&P put in a similar performance.
This has it also reversing at its previous high.
So what do we do? Even with Wednesday’s sell
off, the market still remains overbought based on those reasons given recently:
short-term (and longer-term) average advance/decline
readings, low average NYSE TRIN readings, and price itself. Further,
tonight (Wednesday), I have several market timing signals that aren’t official
sell signals but “are in the spirit” of the systems. Considering
the above with the fact that the indices reversed at their old highs and it
suggests that we are in corrective mode. Therefore, on the long side, you might
want to wait for the current overbought situation to resolve itself. On the
short side, for the aggressive (or those looking to hedge longs), look for a
possible trade in the index shares should they show continued signs of weakness.
No setups tonight.
Best of luck with your trading on Thursday!
Dave Landry
P.S. Reminder: Protective stops on
every trade!
“….your book is like an investing bible to me, and I thank you very much for writing in a simple straight forward style that even a novice like me can use….”
Thanks Much,
Cliff A.
