Good evening StockBandits!
The NAZ tagged 3000 right on the nose today and then pulled back, giving up 34 points from its high of the session as it went out near its low. Volume picked up considerably, pointing to heavy turnover taking place as techs failed to clear the round number. Meanwhile, the S&P 500’s push through 1370 was short-lived, as that level was given up today. We also saw the DJIA move back below 13,000 and the RUT broke down from its multi-week trading range by undercutting 815.
On the surface, the indexes didn’t lose much ground, but it’s the way it happened which I think deserves a closer look tonight. Having tagged new intraday highs today only to finish negative, it’s not the kind of price action the bulls are proud of. Today’s bar looked toppy, and those who watch candlesticks will note a number of ‘tails’ on their charts.
The fact is that the uptrends are not broken at this point, but I’ve been advising added caution lately as the price action has become just a bit predictable. Every dip has been bought, right on cue, and yet new highs have failed to inspire additional buying. We’re long overdue a decent pullback, and it would actually be healthy to get one, but the question remains of whether that’s about to begin or if we’ll continue to wait.
I noted last night that the market is still capable of surprising us, and that we’d need to stay on our toes. Today’s downside reversal is yet another reminder of that reality, so it’s important to respect the potential here for a meaningful pullback to begin.
My bearish watch list grew considerably tonight while my bullish watch list contracted, which I also think is noteworthy. Caution should be elevated at this point just in case today’s turnaround sparks some additional weakness in the near term. One way to play it is to consider getting long volatility (VXX, TVIX, etc.) if you’re not a short seller, as we’re likely to see volatility expand if traders sense a shift in the tide – even if it only results in a short-term pullback.
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: OPEN, KORS, SLG, SHLD, WLT, LIFE
Swing Trading Candidates:
NONE TONIGHT
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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.
