Last week my review headline was “Pullback to 50-dma On the Cards”, and that’s exactly what has happened.
This week we are at a real crossroads.
The S&P 500 has closed just below its 50-dma, but our Medium Term Market Timer is oversold at -0.34, where -0.20 is the threshold.
Typically, we don’t want to sell further into an oversold market, but there are some very decent bearish setups forming at this moment.
Add the fact that we’re in that Autumn phase of the market …
Now you see why we are at a crossroads!
Market Timing: I hope you can now see the value of my commentaries …
Here’s what I said last week:
While the S&P was quite extended from its 50-dma, the Medium Term Market Timer wasn’t showing over-extended, and the longer term indicator is still green.
However, we’re likely to continue retracing at least into Monday, and then we’ll see how the market reacts when it hits that level.
We are in “that time of year” where it’s a seasonally awkward time for the markets
Worth being cautious.
This week the Medium Term Market Timer is showing oversold, and the optimal way to play a potential bullish turnaround is to only play non-extended consolidations on a breakout.
As mentioned above, there are also some pretty tempting bearish setups forming, and the market does look vulnerable. One piece of bad news could send it spiraling.
So, a bounce or a continuation are both possible, which is why I say we’re at a crossroads.
Stock Selection: This is where it’s tricky this week. There are plenty of bullish and bearish setups right now.
My focus is on consolidations breaking out in the direction that the main market decides to break.
As per last week, remember there have been a number of false breakouts recently, so super conservative profit targets are the order of the day.
Application: In a few seconds we can see a mixed to Bearish Dashboard combined with a Medium Term Timer suggesting oversold. We can also identify higher probability Big Money Footprint stocks in a click or two.
Don’t chase every setup … If the market turns next week, I’ll look to buy clean consolidations. If it continues to fall, I’ll look to buy puts or short non-oversold bearish consolidations.
Market Overview: Due to the mixed situation, in today’s market review, you’ll see bullish and bearish stocks.
It’s setting up for another choppy week, so be super selective and don’t get hurt by the chaos. We can be patient.
Trade What You See … and make sure you’re seeing at least a couple of our Big Money Footprints.
The new OptionEasy Strategy Analyzer will be released this week, with a further update a couple of weeks later. I’ll be hosting Mastermind sessions for Miami Bootcamp attendees soon after. The trade journal and associated updates are looking seriously good, with phases being released in time for the December Summit and shortly after.
Remember, you can play the video at 1.25x or 1.5x speed to whizz through it faster if you like! I have placed all the stocks covered in today’s review in your “Latest Preview” watch list.