Swing Trade Approach:

I took some partial positions off the table yesterday which included +6% in ETSY (ETSY), +5% in Splunk (SPLK), +3% in Home Depot (HD), while also cutting a couple of other positions to minimize losses following Friday’s sell-off. Also added some more short exposure to the portfolio as well. I’m open to adding some new long positions to the portfolio if the market provides the opportunity for doing so today, by sustaining the gap higher this morning. 

Indicators

  • Volatility Index (VIX) – Huge rally in the VIX on Friday and the highest close seen since October 8th and managed to break above the Monday highs. Also managed to break the declining trend-line off of the December 2018 highs. 
  • T2108 (% of stocks trading above their 40-day moving average): This indicator is in complete breakdown, dropping 18% down to an overall score of 38%. Also the lowest reading since October 8th. 
  • Moving averages (SPX): Rejected at the 10-day moving average and then price action completely fell apart, pushing through the 5-day and 20-day moving average. The only saving grace was the 50-day MA held. 
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Sectors to Watch Today

Energy broke below the December 2018 lows – that is huge. That creates a potential retest of the January 2016 lows. Technology saw a heavy amount of selling as well, pulling back to the trend-line off of the October lows and holding it. The chart itself is actually still a healthy looking chart in the grand scheme of things. Industrials saw a breakdown wiping out all of its gains from December and January. Materials nearing an area that could lead to a bounce area. Utilities remains by far the healthiest index, closing lower, but just barely below its all-time highs. 
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My Market Sentiment

As you would expect following a 58 point sell-off on SPX, there was support levels broken. While a bounce may be had today, be aware of the potential of a possible fade, and even if it closes higher today, doesn’t mean that the bears won’t resume the selling in the days that follow. Highest volume reading on SPX since December 20th. swing trading strategy outlook 585