Tuesday marked Day 2 of the current rally attempt which means that as long as Monday’s lows are not breached the earliest a proper FTD could emerge will be this Thursday. However, if Monday’s lows are breached, then the day count will be reset. Taking the appropriate action on a case-by-case basis with your stocks prompts investors to raise cash when any holdings get into trouble. Trade accordingly.
The technical action in global equity markets is not promising. At this point, several European stock market’s have fallen over -20% from their 52-week highs which technically defines a bear market. The major US averages are all trading below their respective 50 DMA lines which is not healthy. It was also disconcerting to see volume dry up on Monday as the major averages “bounced” from egregiously oversold levels, which usually suggests massive short covering, not new buying efforts. A host of leading stocks closed near their lows after a very strong open which is a subtle, yet important, sign of distribution. However, if this market resolves itself and wants to go higher, we will need to see a proper follow-through day (FTD) emerge before a new rally can be confirmed. Monday marked Day 1 of a new rally attempt which means that as long as Monday’s lows are not breached the earliest a possible FTD could emerge will be Thursday (Day 4). In addition, if Monday’s lows are breached then the day count will be reset. Taking the appropriate action on a case-by-case basis with your stocks prompts investors to raise cash when any holdings start getting into trouble. Trade accordingly.
The market is currently in a correction which, according to historical precedent, suggests 3 out of 4 stocks will follow the market lower until a new follow-through day emerges. That said, taking the appropriate action on a case-by-case basis with your stocks prompts investors to raise cash when any holdings start getting in trouble. It is also important to note that the major averages have experienced multiple “corrections” since the March 2009 lows and each one has been mild at best (less than a -10% decline from the recent high). Therefore, it will be very interesting to see how low this correction goes before the bulls show up and defend support (if that happens).
Additionally, it is important to note that the market can go much lower (or higher) than anyone thinks; so it is of the utmost importance to filter out the “noise” and carefully analyze price and volume for the best read on the health of the market.
The market is currently in a correction which, according to historical precedent, suggests 3 out of 4 stocks will follow the market lower until a new follow-through day emerges. That said, taking the appropriate action on a case-by-case basis with your stocks prompts investors to raise cash when any holdings start getting in trouble. It is also important to note that the major averages have experienced multiple “corrections” since the March 2009 lows and each one has been mild at best (less than a -10% decline from the recent high). Therefore, it will be very interesting to see how low this correction goes before the bulls show up and defend support. Additionally, it is important to note that the market can go much lower (or higher) than anyone thinks; so it is of the utmost importance to filter out the “noise” and carefully analyze price and volume action of the major average for the best read on the health of the market. It will be very interesting to see how the market reacts to Friday’s nonfarm payrolls report slated to be released 8:30am EST.