Swing Trading Strategy:

Be careful of what you put your faith in…

Before you do anything else – watch my video on the stock market and its outlook that I posted this weekend!

It was a nice rebound for the market. S&P 500 rallied 143 points. Huge. I mean, even a 10 point rally would have been huge for this market. I’d even venture to say a 10 point sell-off would even be bullish at this juncture. 

But does it change anything? 

No. We’re still below all the major moving averages, and while we reclaimed some major support, the volume was lighter for a fourth straight day, and it makes me think there wasn’t a ton of interest in this rally. In fact its highs of the day were reached at 12pm ET, and never reclaimed them. If this market was serious, it would have soared past the morning highs and closed at new ones.

But it didn’t. 

That doesn’t mean the market can continue it’s rally and improve sentiment going forward, but it has failed to do exactly that since February 11th, which was the last time the market rallied two straight days. 

Don’t get me wrong, the market has so many discounted and incredibly priced stocks right now, but what good are they, if the market continues its sell-off. We are still below all the major moving averages, and there has been no repair on a technical front and remain on a downtrend with the daily and intraday charts. 

Sorry for being a ‘Negative-Nancy” here but I’m being as serious as I can be with you here. I don’t care about the feel goods or providing hope in the stock market. Sure, I want to see things improve, as I hate to see the world self-destruct on the daily due to the Coronavirus, but we are, and it isn’t worth the risk of capital until we can see some bottoming in this market. 

I’m still 100% cash, and while my heart aches for those losing so much, I am sleeping like a baby in regards to my own welfare in the market – and that is because I manage the risk and make it my top priority. 

You can check out all of my trades that I have made in 2020 – where I have been solid in the green both months by clicking here. 

Indicators

• Volatility Index (VIX) – Following a 43% increase yesterday, it pulled back 8% today to 75.91. It’s safe to say that the VIX remains historically elevated at these levels, and should not be taken lightly. For the most part, such a small decline relative to the huge increase over the past month, I would say the VIX really didn’t budge much. 
• T2108 (% of stocks trading above their 40-day moving average): LOL – A 112% increase today, taking it back up to 3.5%. The highest closing reading of the past 5-days. In the grand scheme of things once you get into the 3’s, whether it is that or anything less, is really trivial. It is grossly oversold. 
• Moving averages (SPX): Currently trading below all the major moving averages. 
• RELATED: Patterns to Profits: Training Course

Sectors to Watch Today

Top two sectors were Utilities, which rallied 11.5% today and Staples which was over 7%. Energy was the only sector to finish in the red, and should continue to be avoided. Technology was near the top of the pack, but when this market is serious about bottoming, I will expect to see Discretionary joining Technology at the top. Today’s leaders were not the ones I expect to see during a market bottom. 

My Market Sentiment