In Blackjack, the accomplished player backs off when his own (first two) cards are sub-optimal and when the dealer is on a hot streak.
The amateur player plays on regardless.
Conversely, only when the accomplished player has a higher probability with the first two cards, will he or she will double down.
Hopefully you get the analogy here.
When the markets are choppy and news-driven it’s time to be more cautious. When the markets – and stocks – are more technical in their behaviour, then it’s time to play more aggressively.
As many members have discovered, it’s a remarkably effective game when conditions are right … and they will always get back to those conditions. But (using our blackjack analogy again) you have to be at the tables in order to take advantage because conditions can change quite quickly.
For example, a flurry of thrusting actions followed by consolidations could be the starting gun for better, higher probability conditions. This conditions can last for days, weeks or months. But if you’re not in the game, you can’t take advantage of them.
What this all means is that even during sub-optimal conditions (like now) you still have to check in and be aware.
Be patient like a lion, not gung ho like a headless chicken!
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Current Market Behavior:
The longer term slower market timer – my OVIsi – is now more settled in the bearish zone
My medium term SPY Swing Timer is negative and slightly oversold, while the Short Term Timer has gone quiet with no arrows recently.
As always, please do not simply follow the arrow signals blindly.
All the indices remain below their 200-dmas and earnings has been a damp squib.
Market Outlook:
Like last week, we are short term oversold with plenty of scope for more downside.
Stock Selection:
Plenty of consolidations today, but not many nuggets. As ever, my focus has been to identify tight consolidations with corroborating OVI behavior and near Key Levels. As you’ll see today, there simply aren’t many of those right now.
Application:
This week I have focused my searches on consolidations near the Key Levels.
Software Upgrades
Nothing to report this week, but plenty is going on behind the scenes.
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Remember, you can play the video at 1.25x or 1.5x speed if you want to save time! I have placed all the stocks covered in today’s review in your “Latest Preview” watch list.