My Swing Trading Strategy

I sold my inverse ETF position in SDS on Friday for a +3.2% profit. While I’d like to still be in that position today, considering how weak the market was, selling it on Friday did make sense as the price action was well below the lower bollinger band and the S&P 500 hadn’t seen six straight days since the end of the December sell-off. Couple that with the end of day sell-off in the VIX to finish in the red, and SPX rallying to hold the 50-day moving average. So for me on Friday, it made sense for me to sell the position and look to get back in on a market bounce. Today will be hard to get short on anything with the huge gap lower, and to get long will require a significant bounce off the lows of the day. I am still long a defensive stock which has performed very well during the sell-off so far, and I hold a profit in. 

Indicators

• Volatility Index (VIX) – The weirdest thing about Friday’s sell-off was the fact that the indicator managed to give up all of its gains, and close down 1.5% on the day. Today, it is expected to open over 21 – a huge move to the upside. But still that shooting star candle on Friday was bearish, and made me uneasy about holding my short position over the weekend. 
• T2108 (% of stocks trading above their 40-day moving average): Another 10% decline yesterday to push the indicator back down to 41%, the lowest such reading since June 12th. 
• Moving averages (SPX): Held the 50-day moving average, and trading below all the other MA’s except for the 200-day moving average. 
• RELATED: Patterns to Profits: Training Course

Sectors to Watch Today

Ten of eleven sectors saw selling on Friday, with the only sector finishing in the green being Real Estate, which to me, doesn’t look appealing to the upside or downside. Utilities and Staples should be an area of safety while this sell-off persists. Materials, Discretionary and Finacials are starting to look stretched to the downside and could see a hard bounce before the other sectors do, as all three are trading below their lower bands. Technology should continue to see the lion’s share of the selling, just as it did on Friday. 

My Market Sentiment

China devaluing their currency isn’t entirely unexpected, as it has become normal for them to retaliate on every one of Trump’s maneuvers in the ongoing trade war with them. However, this move sent shock waves through the financial market and is looking at a move of over forty points to the downside on SPX. Often times these Monday morning gap downs, following a previous move down, can lead to selling exhaustion and a temporary bottom for the bulls to bounce. However, that doesn’t mean we will see that today, so it is best to wait for the bounce to come. 

S&P 500 Technical Analysis

Current Stock Trading Portfolio Balance

• 1 long position.  

Recent Stock Trades – See My Past Performance Here.