Why I View Wednesday’s Sell Off As A Positive
Looking to the indices, on Wednesday, the Nasdaq opened
slightly firmer but soon began to drift lower. Then after the Fed statement, the
market began to freefall. This action has it closing poorly.
The S&P stayed somewhat firmer but also slid on the
Fed’s announcement.
Looking to the sectors: In spite of Wednesday’s
massacre, most areas still remain in uptrends (like the market itself). True,
some sectors such as broker/dealer were hit especially hard and can now be put
into the questionable column. But, once again, overall, most areas still remain
in uptrends.
So what do we do? Boy, I really hate
to sound like one of those “talking heads” on TV, but I like the fact
that the Fed did a little “tapping on the brakes” through their
comments. This brings a dose of reality to the market. And, in the spirit of the
Trend Knockout, shakes out the weak hands (i.e. nervous traders). This action could help
clear the way for the market to trade higher. There’s no need to be a hero
though, continue to wait for entries just in case we see additional corrective
action. On the short side, if you’re not already positioned, hold off on those
sectors mentioned recently such as gold and especially the homebuilders since
they are now very oversold.
To my surprise, there weren’t many meaningful setups
generated by my database tonight (Wednesday). However, with the market pulling
back, I would imagine we should see numerous setups soon.
Best of luck with your trading on Thursday!
Dave Landry
P.S. Reminder: Protective stops on every trade!
P.P.S.
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