Hi Everyone
The markets came roaring back on Thursday albeit on moribund volume. Remember though, one swallow doesn’t make a summer. Are we headed for new highs or is this part of the inevitable retracement of January’s sharp decline? As I mentioned yesterday, for now I believe it’s just part of the inevitable retracement and I do not expect new highs to be made any time soon. The OVI rose to just positive on the Dow yesterday, almost neutral on the Nasdaq, but down slightly on the S&P (see below). This is giving us mixed signals which means if you’re trading the Indices, keep your powder dry.
Now, how would you have faired yesterday in the markets? Well if you were leaning to the short side, with a properly positioned stop-limit short you simply wouldn’t have been filled, so even if you were wrong you wouldn’t lose any money! This is one of the many reasons why trading breakout patterns is so valuable. It means you can often be wrong but not be punished as a result.
No point in trying to predict Friday’s move in this choppy market. However, what’s interesting right now is that the financial stocks are still stuttering along and not providing the leadership one might expect. I’ll talk more about the financial stocks sector soon.
All the best
Guy