Good evening StockBandits!
Friday delivered another punishing loss to the bulls to wrap up September, marking the 5th consecutive monthly decline for the S&P 500. That’s quite a losing streak, but it may not even be done yet. More on that in a moment, but needless to say, with poor finishes in each of the past 4 sessions, the bulls aren’t making any headway whatsoever.
In the bigger picture, there are a few things to consider…
First is that for the S&P 500, RUT and DJIA, we have two short-term lower highs since the recovery peaks were established a few weeks ago. That shows us the market is bouncing to lower and lower levels, reminding us that for now strength is not inspiring more buying but is instead being used for liquidations.
Second, we saw a substantial correction from late-July into early-August which has only been followed by a low-level (but wide) trading range. That may prove to be a continuation pattern for a deeper decline, although we’re still waiting for the trading range (consolidation) to be resolved one way or another.
Third, attempts at rallies have each failed. That includes brief multi-day rallies, yes, but we’ve also seen failed upside breakout attempts from the ranges which quickly came under pressure. Instead, support zones may again be tested, and if that door keeps getting knocked on it may eventually open.
I’m not here to paint the picture of doom and gloom, but merely to share with you my observations on the market from both a technical and psychological standpoint since the two go hand in hand. I’ve been in cash on an overnight basis since July 25th, which has allowed me to sidestep this correction (and hopefully you were positively influenced by that move as well). All of this indecision may eventually be resolved with strength, but the fact is that this market is exhibiting weakness on a few levels right now, and therefore it’s the responsible thing to do to stay on alert and exercise caution until some stability is seen.
In the past several weeks we’ve faced only short-term day trading opportunities, at least for those of us unwilling to accept overnight risk in this indecisive and gap-prone environment. That’s not a bad thing, as we’ve come across some tremendous moves for cash-flow trades such as Thursday’s NFLX short (which yielded more than $16 in just a few hours). I’ll continue to keep my eyes open for quality setups on multiple timeframes, but for now the conditions still warrant preservation of capital and abbreviated trade timeframes with all the indecision and sudden shifts of momentum we’re getting.
I’ll cover my game plan for tomorrow in the video, and as always, feel free to share your own thoughts, trade ideas, and questions down below in the comments section.
Here is tonight’s video:
The Bandit Broadcast Video – Click to Watch!
Video Stocks Discussed: DG, LRY, BHP, RVBD, MUR, MCP, DVN, ILMN, X, WLL, FSLR, CAT
Swing Trading Candidates:
NONE TONIGHT – 100% cash.
[table “136” not found /]The Hit List is a separate post which contains discussion on open positions and swing trade stops and targets, so be sure to check it for further details on swing trades.
