Swing Trading Strategy:

The Fed just can’t seem to help matters…

Yesterday’s Swing-Trading Outlook, I mentioned about the Fed’s actions that “It may help the stock market today, but my biggest concern is how we’ve seen some pretty bold moves made by the Fed of late, and the price bump ultimately all fall apart before the market can even close the day out.” The  market couldn’t even hold today’s pre-market gains into the open, and instead gave up another 2.6% today. 

Look, I don’t know how low this market wants to go, and nobody does. If they say they do, they are an absolute fool. There is no point even engaging in such things. There are price levels that I am watching, but whether they will actually get hit or even hold for that matter, remains to be seen .

For me, if we eventually bounce here, I will only trade it with a few small positions at best, while remaining the majority in cash. If the market continues to improve, or even manage to build on any rally with a multi-day rally, I will slowing increase my long exposure. But I’m not going to force any new trades and you shouldn’t either. Just manage the risk – and that means not trading at all sometimes. 

Indicators

  • Volatility Index (VIX) – This gives me a little bit of hope here because as SPX has dropped two straight days, VIX has done the same. The fear index is coming down some, and that could lead to investors eventually wanting to rally this market a bit. Currently at 61.59. 
  • T2108 (% of stocks trading above their 40-day moving average): Breadth, while still weak, is improving some. We aren’t seeing the more than 20:1 negative breadth that had previously been seen. Again, a divergence from recent market behaviors. 
  • Moving averages (SPX): Currently trading below all the major moving averages. 
  • RELATED: Patterns to Profits: Training Course

Sectors to Watch Today

Technology was the sole sector to finish higher today. Traders are starting to take inventory of some of the massive sell-offs in this sector and scaling into some long positions. Good sign for the market if that can continue into tomorrow. Utilities continued the slaughter, selling off almost 20% in the last four trading sessions. Financials weakened today due to the Fed’s announcements in the pre-market. Industrials showing no willingness to consolidate. 
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My Market Sentiment

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