Good evening StockBandits!
The big question on the minds of many after Tuesday’s rally was ‘how far will this bounce carry,’ but I noted the importance of the next decline as the biggest tell for this market. I didn’t expect to see it happen so quickly, but today we got that answer with a decisive move lower which easily erased yesterday’s gains.
The quick evaporation of Tuesday’s gains (and hope of the bulls) reminds us that it’s been some time since we saw any upside follow through in this tape. In fact, we’ve yet to see two consecutive advances since late-May. The last two times a bounce was this quickly erased, we still had more to go on the downside, so continued caution is certainly warranted here. Stated otherwise, the hero trade remains very out of style, as all attempts at catching the low have thus far failed to produce anything but account damage for those trying.
The S&P 500 has the March low at 1249, and that level’s now just a little over 1% away from tonight’s close. It could be that we need to undercut that level and flush out the bull holdouts before a bounce is able to stick.
I’m still averse to overnights, particularly with the sizeable gaps we’re now seeing occur more frequently. That makes it even more difficult to manage risk in a market which remains very oversold yet continues to gain no traction on bounce attempts. A bounce which matters will eventually occur, but keep in mind that the farther we go down, the higher the number of bulls who become trapped on the long side who will want out on subsequent rallies. That, combined with the growing confidence of the bears, will likely keep things tricky after the initial bounce kicks in.
** On another note, I’ll be at the Trader’s Expo in Dallas on Thursday through Saturday. If you’ll be there, let me know! Also, there will be no Thursday evening Broadcast this week.
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!
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Video Stocks Discussed: TZOO, ARIA, QIHU, IDCC, RAX
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.
