Good evening StockBandits!
Stocks spent the day in a relatively tight range of indecision, flip-flopping around without making any meaningful headway in either direction. The major averages finished mixed and little-changed as Monday’s huge rally was digested with some churning price action throughout today’s session.
Although we’re likely to see a pullback at some point after such a sizeable rally off last week’s lows into the upper end of the range, as of yet we haven’t seen one begin. Interestingly, both the bulls who are underinvested (and are interested in buying the dip) and the bears caught on the short side are rooting for a pullback, but the market isn’t cooperating with either.
That’s keeping the charts of individual stocks pressed for the time being, so we’ll wait and see what comes about. Even some additional rest with some lateral price action would be extremely beneficial to help digest the rally, and every day counts. A few sessions of congestion would create a slew of bull flag patterns from which new trades could be initiated, but we’ll have to patiently wait for that to occur.
This market overall remains range-bound, and while the fear index (VIX) has retreated to the low 30’s, volatility is still rather high in terms of wide daily ranges and frequent, large overnight gaps. It’s been a couple of months since we have seen the market put in rest, but the way might continue if traders remain fixated on news – particularly Europe.
To say the least, it’s a mess out there and there’s little to do until it’s resolved, other than scalping some intraday moves. The biggest factor right now is patience for navigating this market. Rather than forcing entries in an attempt to be involved in some way, the best traders are willing to sit on their hands and let the setups build. We’re still caught in a multi-month trading range, we’re facing a volatile, headline-sensitive environment right now, and there are very few setups worth noting.
This will at some point come to pass, but for the time being we have to respect it and I think cash is a great place to be at the moment given all the uncertainty this market is facing. Stay patient out there, because we will see some good opportunities emerge from all of this.
Tonight I’m going with the written format as I know some of you enjoy being able to skim the setups. My notes and trade levels are provided on the charts below.
Please leave your comments and/or questions below if you have any, I always enjoy the interaction.
Swing Trading Candidates:
NONE TONIGHT
Day Trading Candidates:
These are the trades I’m eyeing for potential plays tomorrow. I will not be holding these overnight, and will wait for these levels to be crossed before entering trades. Please see the Day Trading Strategy for more details on how I manage these trades.
The Hit List will not be posted tonight as I am 100% cash overnight and there are no new swing trades for Tuesday. The Hit List typically contains stop and target levels for my swing trades.
You are sure right that the market is not willing to make or follow setups – trends last less than a half day. Common sense is to sit back and wait for some consistency to return rather than just throwing money into stop losses that have to be so large they ruin the risk reward profile. Today what looked like a geniune trend crumbled before news of the Slovakian government rejecting the bailout. (Who every heard of Slovakia before today?) Any bit of news causes a change in direction. At some point the market will get its meds balanced enough to not jump at the slightest noise, until then, its time to do chores around the house.
I agree John, this kind of market makes it very easy to chase moves and overtrade, losing touch with appropriate risk/reward setups. Like you said though, it’s so headline-sensitive that virtually ANY european headline has an impact. Kinda funny when Slovakia is making waves here!
I should have mentioned that today’s volume was quite light again, I believe insignificant due to the indexes resting and simply marking time. Had we seen a meaningful move accompany such light volume (on a non-holiday), we’d have something to consider, but today stocks just churned and the light volume reflected that.